RTTNews - The Singapore stock market turned right back to the upside on Wednesday, one day after ending the modest two-day winning streak in which it had collected 90 points or 4 percent on its way to its highest closing level so far this year. The Straits Times Index broke above 2,380 points, but now analysts say that the market is likely to hand back many of the recent gains in Thursday's trade.
The global forecast for the Asian markets is heavy on pessimism, as many of the bourses are riding lengthy winning streaks and are overdue for a correction. Some uninspired economic data out of the United States adds to the negative sentiment. The European markets finished sharply lower, and the U.S. markets also ended firmly in the red, and the Asian markets are also forecast to move to the downside.
The STI finished slightly higher on Wednesday, as strength among the financial stocks was enough to nudge the market into positive territory.
For the day, the index was up 8.00 points or 0.34 percent to close at 2,383.82 after trading between 2,376.02 and 2,424.36. Among the gainers, United Overseas Bank and DBS Group each gained 2 percent.
Wall Street offers a negative lead as stocks snapped a four-day winning streak on Wednesday, seeing a moderate retreat over the course of the trading session. The major averages all moved lower, as traders did some profit taking in reaction to some discouraging economic data.
Earlier in the day, Automatic Data Processing, Inc. (ADP) said that private sector employment experienced another notable decline in the month of May, with the decrease in jobs slightly exceeding economist estimates. ADP said non-farm private employment fell by 532,000 jobs in May following a revised decrease of 545,000 jobs in April. Economists had expected a decrease of about 525,000 jobs compared to the decline of 491,000 jobs originally reported for the previous month.
While a separate report from the Institute for Supply Management showed a slower pace of contraction in the service sector in the May, the index of activity in the sector increased by less than economists had expected. The ISM said its index of activity in the service sector rose to 44.0 in May from 43.7 in April, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting a somewhat more notable increase to a reading of 45.0.
Additionally, the Commerce Department released data showing a notable increase in factory orders in the month of April, but the increase came after a substantial decline in the previous month and came in slightly below economist estimates.
Traders largely shrugged off comments from Federal Reserve Chairman Ben Bernanke, who said recent data suggests that the economy will likely slow its pace of contraction on the back of improved consumer sentiment and consumer spending. Bernanke also warned of the potentially dire consequences of allowing the deficit to remain high and called on Congress to consider long-term steps for fiscal balance.
While the major averages moved well off their worst levels of the day in late day trading, they remained firmly negative. The Dow closed down 65.63 points or 0.8 percent at 8675.24, the NASDAQ closed down 10.88 points or 0.6 percent at 1825.92, and the S&P 500 fell 12.98 points or 1.4 percent to 931.76.
In corporate news, Singapore Telecommunications (SingTel) has said that it is ready to support Bharti Airtel's proposed merger in South African MTN by rebuilding its strategic stake in Bharti if its holding is diluted by the tie-up, according to various media reports.
SingTel owns 30 percent stake in Bharti that revived its merger talks with the South African major. The merger proposal is being assessed by regulators as it is a complex cross-shareholding deal. MTN offered to buy 25 percent stake in Bharti with cash payment of $2.9 billion along with new shares. Bharti would buy 36 percent of MTN's shares for 86 rand plus 0.5 Bharti shares per share. This would raise Bharti's holding in MTN to 49 percent, while MTN's institutional shareholders would hold about 11 percent in Bharti.
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