Singapore shares close lower on weak oil, slide in Dow futures

A 130-point loss for the June Dow futures, a 2.4 per cent loss for the Nikkei 225 and a 1.6 per cent slide in the Hang Seng Index - faced with nothing but weakness in these markets, the Straits Times Index (STI) stood little chance, finishing Tuesday with a loss of 34.43 points at 2,800.92.

The selling was led by the three banks and Singtel, and resulted in the overall market recording an advance-decline score of 137-266 excluding warrants. Volume traded by the 30 STI components amounted to S$807 million, about 73 per cent of the entire market's turnover of 1.2 billion units worth S$1.1 billion.

Observers pointed the finger at weakness in the oil market as possibly triggering fresh waves of short-selling; in overnight trading, oil fell by just over 3 per cent to around US$35 per barrel. Also a consideration was when the US Federal Reserve might raise interest rates - as at Monday, the federal funds futures market placed a 23.5 per cent chance of this occurring in June.

Whatever the case, brokers said that after four-five weeks of relative calm, heightened volatility looks set to return. "We had a nice bounce that took the STI up 11 per cent from its low but that looks to be over" remarked a dealer.