Asian market preview 06/08/2008

US markets were closed sharply higher last night as investors enjoyed reports that services sector activity fell less than expected last month, another drop in oil which took crude price to as low as $118 per barrel and finally, The Fed keeeping rates steady at 2% completes the huge rally. Early in the trading session, shares rose higher after Institute for Supply Management said its services sector index rose to 49.5 from 48.2 in June, higher than analysts expected at 49.0. Although any reading below 50 signals a contraction, but that reading brings some optimism to investors that the economy is recovering gradually. Oil also play a big part in yesterday's rally as it dropped to as low as $118 per barrel before it finally settled at $119.17 per barrel which brought the drop to $28 since its peak of $147.27 reached on July 11. The rally was then extended after The Fed announced to keep its rate steady at 2% as expected. Its accompanying statement is a little bit darker, stating that "inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities." But it also said it expected inflation to moderate later in the year. On the earnings front, Cisco Systems reported a 4.4% increase in net income, beating expectations. P&G said its fiscal Q4 profit jumped 33% while D.R. Horton Inc. reported narrower fiscal Q3 loss. The Dow soared 331.62 pts or 2.94% to 11,615.77, S&P500 shot 35.87 pts or 2.87% to 1,284.88 while Nasdaq rose 64.27 or 2.81% to 2,349.83.

Asian markets are expected to open higher today following the strong US markets close and after The Fed kept interest rate steady at 2%. The 2-day decline around the region may also prompted some bargain hunters to hunt for cheap stocks as oil drops to below $120 per barrel. Finally, investors can have some confidence buying stocks with recent news and the decline in commodities prices. US$ gained strength against major currencies which will also boost exporters around the region. Oil was recently traded around $119.20ish per barrel, gold traded around $873.10ish while JPY traded around 108.28ish. Nikkei futures was closed at 13170 in CME compared to the close of 12975 here yesterday.

Kospi may open higher at around 202 today following US markets strong close and the plunge in oil prices overnight. Investors may be boosted with weaker oil prices which will indicate that inflation may be going down later on in the year. With The Fed keeping rate steady at 2%, investors are expecting that The Fed are waiting patiently for economy to recover and this may bring positive sentiment to investors. Kospi may find support at 200 and resistance at around 205 today.

Hangseng may open higher at around 22300 today and may even rise higher after 2 days of declines. The drop in oil prices may boost investors' confidence to buy into stocks with optimism that inflation will go down. China markets may also play a part in determining how high Hangseng will go today. With index being below 22000, bargain hunting may come in and help boost the market today. Hangseng may find its support at 22100 and its resistance at 22700 today.