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Singapore shares close mixed - STI down but nearly even gains/losses in broad market

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THE Straits Times Index (STI) drifted within a narrow band for most of Thursday's session before finishing with a 5.26-point loss at 2,940.48. Turnover amounted to 966 million units worth S$1.05 billion which was lower than the previous S$1.2 billion, and excluding warrants there were 215 rises versus 209 falls throughout the market.

Market observers said the index, having jumped more than 7 per cent since the UK voted to leave the European Union on June 23, is now at a crossroads of sorts and likely to "consolidate" given that bond yields are at all-time lows versus US stocks at all-time highs.

Wall Street ended Wednesday with the seventh all-time high for the Dow Jones Industrial Average and the sixth for the S&P 500 in eight sessions, performances largely attributed to hopes of better-than-expected earnings but more likely because the US Federal Reserve has signalled it will keep interest rates depressed for longer than previously thought.

There are also worries that the post-Brexit bounce in equities globally has come largely because central banks had promised liquidity support and not because of improved fundamentals.

This was the point made by the International Monetary Fund (IMF), which this week warned that markets could be setting themselves up for a severe correction. "Financial markets are behaving as if the exit vote never happened," said the IMF. "These stock price gains have generally not been supported by prospects for earnings growth, which are modest at best." It added that the plunge in interest rates and flattening yield curves imply that markets "expect weak growth and subdued inflation ahead".