Global markets continue to show volatility in the third quarter, with regional indices rebounding from earlier lows in general. Such movements present short-term opportunities for investors with a view on the market to engage in their respective positions through index warrants.

Despite current uncertainty over the global recovery, most markets around the world showed gains for the third consecutive week last week, with many Asian markets also trading well.

At the end of Thursday, the week-on-week comparison saw the MSCI World Equity Index rose by 1.6 per cent to close at 1,157 points while the MSCI Asia-Pacific ex Japan Index closed at 430 points, an increase of over 2 per cent. Commodity prices were up too:

The Dow Jones UBS Index rose 1.4 per cent to close at 135 points.

The Japanese government’s intervention in the forex markets had caused the Yen to drop to its lowest against the US dollar in 22 months. This dip has spurred the Japanese market to rise to its highest in six weeks — the best performance by the Nikkei this year.

Japan has also put in a rather consistent performance economically.

Capital expenditure for the second quarter of 2010 grew faster than expected, pushing up the gross domestic product for the country. Core private sector machinery orders, regarded as a leading indicator of capital spending, rose 8.8 per cent in July — notably more than the initially expected 1.8 per cent.

Government subsidies and incentives continue to drive domestic consumption, as manufacturers’ orders climbed 10.1 per cent in July. Economic data also showed that orders from the services sector grew 8.1 per cent — the first increase in three months — a sign of a stabilising domestic demand.

The Japanese government’s intervention in the Yen showed that they are able and willing to support the recovery of its economy. Hence, the Japanese equity market might continue to react positively.

Technical analysis also supports the recovery in the Japanese market.

Both the Moving Average Convergence-Divergence and Stochastic indicators point to the recovery of the Nikkei. Momentum for the uptrend is also building steadily.

With the uptrend currently in place, we can expect further gains in the Japanese market in the months to come.

However, as there will still be expected volatility from concerns over the recovery of the world economy,

The Singapore market has been on the uptrend over the past week and looks to continue into the coming week. With that in mind, investors should buy stocks that are still lagging slightly behind the general rally for greater upside potential. These include Ezra, Wilmar and NOL, which seem to have good upside potential.  Traders can use call warrants to leverage and extend their positions in those counters.