Local shares rallied after taking the cue from Wall Street overnight as cautious remarks from Federal Reserve chairman Janet Yellen convinced investors that there would be no increase in interest rates this month.
This momentary relief, coupled with a recovery in commodity prices, will likely continue to buoy the local market, one analyst said. But others said there is little to cheer about, especially on the economic front.
Dr Yellen said yesterday morning (Singapore time) that, while she was optimistic about long-term US growth, surprisingly poor jobs data last week was "concerning".
Economists had expected around 160,000 jobs to be created in May but only about 38,000 were added to corporate payrolls.
Just a few weeks ago, Dr Yellen had signalled that the Fed planned to raise rates "in the coming months", but she did not repeat that statement yesterday.
The markets took this to mean that the Fed will definitely not be hiking rates at its meeting next week, and quickly rallied.
Singapore's Straits Times Index ended the day 16.81 points, or 0.59 per cent, higher yesterday.
ANZ economist Ng Weiwen pointed out, though, that the jobs data is nothing to cheer about.
"Singapore is highly dependent on external demand. China's growth momentum looks a bit wobbly and now the jobs data signals that US growth might not be as strong as envisaged," he said.
"This reinforces our view that risks to Singapore's economic growth are skewed to the downside, especially if our domestic drivers, such as construction, aren't able to pick up the slack."
A delay in rate hikes is unlikely to spur much more economic activity either, he added, noting that local business sentiment has been weak.
Bank lending in Singapore fell in May, the seventh straight month of decline, hit mainly by a continued decline in business lending.
DBS chief investment officer Lim Say Boon said the US economy could in fact be weaker than what the market thinks: "On the upside, wage growth has remained healthy. But this could be a matter of lagging data. There has been a trend towards a slowing in hiring."
Not that the market is worried about that right now. CMC Markets analyst Margaret Yang said investors are betting that the next rate hike will be in September at the earliest, and they are celebrating.
"It's especially good for rate-sensitive industries, such as real estate investment trusts," she added, noting that a continued recovery of commodity prices is helping local shares.