Singapore Markets Morning Briefing - what you need to know for Tues April 10, 2012

A weaker open looms for the STI with the ASX 200 already down 1% and Wall Street suffering more fallout from the US jobs data.

IG Markets Singapore said:

Is the party over for 2012’s stock market rally which was fuelled by cheap credit and false hopes of a US economic recovery? While this may sound alarmist, it is the sort of sentiment that is rife on trading floors as markets continue to head south.

Last night Wall Street suffered more fallout from the weaker-than-expected jobs data which has sent shivers down the spines of bulls who had pinned so much hope on non-farm payrolls data pointing the way to a global economic recovery gathering pace with the US in the driving seat.

The S&P 500 dropped 1.1%, while the Dow Jones Industrial Average fell 1%.

Europe would have gone the same way had most bourses not been closed for the Easter break. Asia definitely felt the chilly winds of investor panic yesterday, with major regional markets sliding.

They weren’t helped by Chinese inflation creeping up for March which could limit the options available for the PBOC for further monetary easing.

All this disappointment highlights the fact that any global economic recovery won’t be happening in a straight line. There will be blips and setbacks along the way. Hopefully March’s non-farm payroll data is one such blip and not the start of a downward trend.

China will be in the spotlight again this morning when it releases its trade balance figures for March. They can’t come in any worse than February’s which showed a huge deficit of $31.5bn.

The smart money is on a significant narrowing of the trade deficit last month, now that seasonal distortions are taken out of the equation. February also saw China stockpile on commodities as prices were starting to rise, which inflated its import figures.

But in hindsight this hasn’t worked out that well as commodities have since slipped. WTI crude briefly fell below $101 a barrel last night before recovering to $102.26. Brent is at $122.15 as more downward pressure is put on oil prices with faltering US employment, rising stockpiles and Iran due to take a seat at a very long negotiating table.

US copper futures fell more than 2%, as a global economic recovery now looks frustratingly slow, like a tortoise crossing the road.

In Singapore, Genting is likely to be a well talked about company with its perpetual bond issue kicking off today. It hopes to raise $500 million from a retail investor initiative, offering a yearly distribution rate of 5.125%.

The funds will go towards possible expansion across Asia. Given Genting’s track record and the poor rates of interest in savings accounts, investors are likely to be queuing round the block for this one.

While the Nikkei Average has opened slightly higher this morning the ASX 200 is already down 1%. The futures market points to a weaker open for the STI this morning.

OCBC Investment Research meanwhile noted:

Although US stocks fell more than 1% overnight, the local bourse which has already seen a similar heavy pullback yesterday, is likely to derive some mild optimism from the positive Nikkei start (+0.4% now).

The STI, which took cue from the sharply lower US index futures yesterday morning, plunged nearly 0.8% at the open before slipping to a 0.9% loss by the close.

But with today's tone likely to show some near term improvements, we could see the index initiating a technical rebound back in the direction of the now support-turned-resistance at 2975 for a test.

Beyond this immediate obstacle, the subsequent key resistance still lies at the 3030 recent major peaks. On the downside, the immediate support is now pegged at 2945 (resistance-turned-support), followed by the key base at the 2900 resistance-turned-support.