Singapore Markets Morning Briefing - what you need to know for Mon Feb 27, 2012

There were continued gains on Wall Street and the Nikkei started strong.

OCBC Investment Research said:

The stronger Nikkei start (currently +0.7%) on the back of continued gains on Wall Street is likely to inspire a similar opening for the local bourse this morning.

Traders are also likely to be pleased to note that the STI, which closed 0.3% higher Friday, managed to stay above 2957 (61.8% retracement of fall from 3227 to 2521).

Daily technical indicators though remain slightly mixed – the RSI is still to show signs of a rebound just above the 50% mark; but MACD continues to trend lower at the recent negative crossover; stochastic still shows the market as being overbought.

Hence, the index may still have a tough time clearing the key 3000 level; any failure is likely to be taken as a signal to take profit. Otherwise, the next resistance can be found at 3044 (upper Bollinger band).

On the downside, we peg the initial support at 2957, ahead of 2883 (lower Bollinger Band).

GFT, on the other hand, noted:

It will be an extremely busy trading week for the euro that could seal the currency’s fate for weeks to come. Aside from the LTRO, Germany will also be voting on the second bailout for Greece and Eurozone finance ministers will be meeting ahead of Thursday’s EU Leaders summit.

There is scope for some big announcements but also room for disappointment. If we assume no new developments for Greece – which is quite possible considering that everyone wants to wait and see how much participation there is for the bond swap, then the main event risk will be the central bank’s long term refinancing operation.

The ECB’s first LTRO kicked off a sharp rally in equities that drove the DJIA above 13,000. Expectations for more stimulus from the ECB is part of the reason why equities powered higher and the size of next (this) week's LTRO will determine whether the risk rally continues.

RBS meanwhile reported:

Flows were quiet today (Friday), as reflected in the fact that Total Treasury broker volume today (Friday) was 74% of the 10-day average.

Treasuries traded near unchanged for the bulk of the session, with 10yr yields putting in a 4bps range since yesterday's (Thursday) close. Most notable was the outperformance of the 30yr, as investors look ahead to month end as well as the Fed purchase operations between now and then.

Contributing to the quiet nature of the day was the fact that, for once, there is not a lot of weekend risk surrounding Greece or other risk factors, unless you count to ongoing tension with Iran. Speaking of which, the trajectory of retail gas prices is increasingly uncomfortable.