S'pore market to take cue from key US data

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THE Singapore market will take its main cue this week from key United States economic data as investors search for more clues on the pace of the global recovery.

Despite a holiday-shortened week in the US, a slew of economic indicators will be released this week.

The most keenly watched will be Thursday's report on US unemployment and payrolls. These numbers are seen as key indicators of economic momentum, and could give investors leads regarding the timing and strength of a rebound from the crisis.

Investors will also be monitoring key manufacturing surveys in New York and Chicago, including the Institute for Supply Management index.

Market players will also pay attention to the European Central Bank (ECB) briefing on Thursday and its interest rate announcement. Analysts expect the ECB to keep interest rates at 1per cent and stress that rate hikes are still a long way off.

Last week, the US Federal Reserve calmed markets by not changing its near-zero interest rate policy and signalling it would keep its stimulus efforts on track.

World Bank chief economist Justin Lin, who was in town last week, said confidence in a sustained recovery would come only when a rally in financial markets converges with a similar rebound in the real economy.

Last week, the Dow Jones Industrial Average slumped 1.19per cent for the week to 8,438.39.

Generally, most investors have been coming out of hiberation and have been willing to take more risk.

Citigroup said in a global equity strategy report: 'Investor risk appetite is returning. Over the last four months we have seen large outflows from traditional safe havens including money market funds. Much of this money has flowed into riskier credit and equity funds.'

It noted that the biggest flows within equities are into emerging markets. So far, inflows this year to emerging market equity funds have returned more than half of the outflows seen last year.

Back home, the benchmark Straits Times Index closed at 2,317.95 points last Friday, up 44.77 points, or 1.97per cent from the previous week.

However, trading volume continued to slump. Average daily volume last week was just 1.39billion shares valued at $1.28billion, compared with 1.86billion shares worth $1.49billion the week before.

Although the Singapore bourse appears to be in a consolidation phase as economic recovery seems tentative, market experts say more upside is possible.

Local stocks could also see mild gains from window dressing as the first half draws to a close tomorrow.

UBS analysts said it was 'premature to judge that the rally is over', 'in the absence of negative data points', such as 'renewed growth weakness, rising inflation or withdrawal of policy easing'.

Kim Eng believes there will be 'a more sustainable rally in the latter part of this year' as more signs of green shoots emerge and the credit market loosens.

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