Dec 1st, 2015 by Nick
Good morning. The market had a bit of a spike down at the open yesterday on negative announcements from mining company BHP Billiton and Aberdeen Asset Management, unfortunately not quite low enough to trigger the buy at 6320 though, hitting 6328 instead. During the rest of the day the market stabilised and traded near the unchanged level as most eyes were on the ECB announcement on Thursday. The short at 6378 managed a few points but it was a pretty lacklustre session once the bounce from the 6328 had occurred. It looks like a wait and see situation for traders and so we could be locked into the 6325-6425 range until Thursday.
US & Asia Overnight from Bloomberg
China’s benchmark stock index fell to the lowest level in a month after official data showed manufacturing conditions are deteriorating.
The Shanghai Composite Index slipped 0.5 percent to 3,427.25 at 1:06 p.m., led by financial and energy companies. China’s slump was in stark contrast to regional markets, including Hong Kong, where the Hang Seng China Enterprises Index jumped 1.9 percent to halt a six-day losing streak. The yuan weakened 0.2 percent in offshore trading after the International Monetary Fund said it would add it to its basket of reserve currencies.
The Shanghai Composite’s rebound from a $5 trillion rout is starting to ease after the gauge closed out November with a 1.9 percent gain, the smallest percentage move since January. Rising investor optimism with the return to a bull market earlier in the month has given way to caution as the government started withdrawing market support. Recent data have also mostly been dismal with exports falling, industrial output slowing and producer prices continuing declines. Tuesday’s report showed the official purchasing managers index at 49.6 in November, down from October’s 49.8 and below the level of expansion.
“Sentiment in the Shanghai market was affected by the PMI number,” said William Wong, head of sales trading at Shenwan Hongyuan Group Co. in Hong Kong. “The SDR bid has translated to an irreversible process of financial liberalization and will benefit China’s financial sector in the long run. The A shares will react to the news over time.”
In Shanghai, coal producers led declines for energy producers, with Wintime Energy Co. plunging 2.1 percent. Bank of China Ltd. paced losses for lenders, sliding 2.7 percent. Brokerages also retreated, with Western Securities Co. dropping 4.1 percent.
China’s manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the nation’s old growth drivers add to risks facing the government’s growth target of 7 percent. Six central bank interest-rate cuts in a year haven’t been enough to spur a recovery in manufacturing, which has continued to weaken while activity in the services sector has shown more strength.
Another manufacturing PMI released by Caixin Media and Markit Economics edged up to 48.6 in November, exceeding the median estimate of 48.3. The gauge has a smaller sample size and includes smaller companies and exporters.
Hong Kong’s H-shares gauge headed for its biggest gain in a month, benefiting from a return of risk appetite. Benchmark share measures from Tokyo to Sydney and Seoul climbed at least 1 percent as Standard & Poor’s 500 Index futures rose 0.5 percent. The H-shares measure slumped 5.8 percent last month, the worst performance among major stock gauges in Asia.
The IMF said the Chinese currency will join the dollar, euro, pound and yen in its Special Drawing Rights basket. While yuan inclusion is short-term negative for Chinese stocks, it is positive in the long term, UBS Group AG analysts wrote. The risk of depreciation is likely negative for stocks on a three- to six-month time horizon, they said. Still, increased capital account opening and further domestic capital market development, coupled with very low global exposure to Chinese assets currently, could bring more inflows in the long term, they said.
“We see in particular the yuan inclusion to the SDR basket has lifted sentiment in the Asian stock market,” said Adrian Zuercher, the Hong Kong-based head of Asia asset allocation at UBS. “We think Asia is attractively valued and there is too much pessimism on China.”
U.S. short sellers are piling on bets against Chinese equities at the fastest pace since the height of the nation’s stock-market bubble five months ago. Short interest in the largest U.S. exchange-traded fund tracking domestic Chinese stocks more than doubled in two weeks to a record 28 percent of shares outstanding on Nov. 27, according to data compiled by Markit and Bloomberg. When such wagers last climbed this fast in June, short sellers proved prescient as China’s equity-market boom turned into a bust.
Hong Kong’s Hang Seng Index rose for the first time in seven days, adding 1.7 percent. The CSI 300 Index declined 0.5 percent.
“Hong Kong has dropped for quite a few days so they’re taking it as an excuse to squeeze those short sellers and the latter has to do short covering,” said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd. [Bloomberg]
FTSE Outlook and Prediction
As mentioned above its a bit of wait and see till the ECB on Thursday and what, if any, stimulus measures might be announced. We also have a commons vote on Wednesday about bombing Syria, though markets have largely remained unperturbed by this. Anyway, onto today. We have the pivot at 6363 so I think we may see some support here initially, though the 6326 area is support below this where we have the 10 day Bianca channel and yesterday’s low – so worth a long at this level if it gets this level. Resistance wise we have 6400 as the main attraction, with 6425/6430 above that and worth a short from. It’s the first day of the new month so usually slightly bullish as there is the influx of new money for the month, but any initial rise to the 6430 area this morning could easily reverse. Gold has moved up off its recent lows, and we had a bullish ASX session today, so there is a slight bullish tinge to todays proceedings!
Nov 30th, 2015 by Nick
Good morning. It was a mainly quiet day on the FT100 on Friday with Wall Street having a shortened day of trading. The 6350 long ran up for a few points, whilst the Dax was the best performer for the trade plan, playing out as predicted rising to 11350 then falling back. The only news which moved the market was some weak China economic data overnight and a fall on the Shanghai index due to some broker irregularities. This and a negative announcement from Anglo American had a knock-on effect on the commodity sector which fell around 4%.
US & Asia Overnight from Bloomberg
Asian stocks fell after Chinese shares posted the biggest one-day selloff in three months. Material and consumer-staple shares led losses on the benchmark index at the start of a pivotal week for the region’s markets.
The MSCI Asia Pacific Index lost 0.3 percent to 132.82 as of 9:02 a.m. in Tokyo, headed for a monthly loss of 1.2 percent, its sixth such decline in seven months. This week brings a decision by the European Central Bank and the last reading on U.S. jobs before the Federal Reserve decides on whether to raise interest rates in December. The Shanghai Composite Index dropped 5.5 percent on Friday, its largest retreat since the depths of a market rout in August, as regulators clamped down on brokerages.
“The main event is the ECB moving on Thursday and the U.S. non-farm payrolls on Friday,” said Mark Matthews, head of Asia research and a managing director of Bank Julius Baer & Co. in Singapore. Friday’s move in Chinese markets was “a positive because they were investigating brokers, which is a sign they don’t want another bubble to form, which was happening as it was up about 25 percent just in the last couple of months. It was oversold on Friday and I would expect it to bounce today.”
Japan’s Topix index lost 0.3 percent. Data Monday showed a preliminary reading for industrial production rose less than economists estimated in October compared with the previous month, while retail sales climbed more than they had expected.
Australia’s S&P/ASX 200 Index added 0.1 percent. Dick Smith Holdings Ltd. plunged 47 percent in Sydney after the electronics retailer said it sees a A$60 million ($43 million) writedown and abandoned its profit forecast.
New Zealand’s S&P/NZX 50 Index increased 0.4 percent. South Korea’s Kospi index fell 0.8 percent. Futures on Hong Kong’s Hang Seng Index added 0.3 percent in most recent trading, while contracts on the FTSE China A50 Index slid 0.2 percent.
China’s securities regulator is investigating Citic Securities Co., Haitong Securities Co. and Guosen Securities Co. over alleged breaches of rules on margin and short-selling contracts. Shares of Chinese brokerages led the decline on Friday.
E-mini futures on the Standard & Poor’s 500 Index fell 0.2 percent after the underlying gauge climbed 0.1 percent on Friday in a shortened session. As investors await payrolls figures for November, traders are now pricing in a 72 percent chance the Federal Reserve will raise interest rates in December.
European policy makers meet Dec. 3 to discuss monetary policy and what the ECB can do to prop up sluggish inflation within the region. The central bank is considering cutting its deposit rate further below zero and adding to its program of quantitative easing.
International Monetary Fund Managing Director Christine Lagarde and some two dozen officials on the fund’s executive board gather Monday in Washington to decide whether to grant China’s yuan status as a reserve currency by adding it to the fund’s Special Drawing Rights basket. While Lagarde has already announced that fund staff had recommended the yuan be included and that she supported the finding, the IMF is likely to give more details on how it arrived at the decision.
This week also sees a policy decision from the Reserve Bank of Australia, while members of the Organization of Petroleum Exporting Countries will gather in Vienna. [Bloomberg]
FTSE Outlook and Prediction
I am feeling a little bearish this morning looking at the charts, with a decline from the 6380 level towards the 6315 area looking distinctly possible. We have the daily pivot at 6369, as well as the hull ma (2hour) showing resistance at 6377. A short around this area first thing this morning could set the tone for the day, especially as Asia stocks have fallen during Mondays session. The ASX200 (Australia) had a little rise initially then fell back also. I think the FTSE will follow the same pattern today. However, if not and the bulls manage to break the 6380 area of resistance then a rise towards the top of the Bianca channels at 6450 is possible. We have an ECB meeting on 3rd December which may yield further monetary stimulus, so might see some more bullishness around then in anticipation of that. 6345 area is going to be initial support today, as that was Fridays low that we bounced off, the bottom of a rising 30min channel and the 200ema on the 30min there also.Therefore the bears, if they show up first thing, will be keen to break through this strong area of support to target the 6315 level. Below 6300 and there is quite a lot of fresh air till 6200 and 6140 so the bulls will be keen to defend this area.
Just testing the pivot at 11276, with a 30min channel support below that at 11255. If that breaks then a decline to S1 at 11193 looks likely. Also looks bearish really, dropping off the 20 day Bianca at 11342 overnight.
LONG 11255, stop 11240, target 11350
SHORT 11350, stop 11377, target 11280 or lower
Nov 27th, 2015 by Nick
Good morning. Am now back in the UK after travelling back yesterday, probably a good day to choose in the end with the US in Thanksgiving holiday mode. The FTSE100 ground up slowly through the day to close near its highs, and nudge the 6400 level during the session. The two main supports were a rally in base metal prices (after falling to multi-year lows) and expectations of aggressive European Central Bank (ECB) action next week. US markets were closed so the thin trade exaggerated today’s move. The main sector to benefit today was commodities on the back of metal price rises.
US & Asia Overnight from Bloomberg
Asian stocks advanced, with a regional gauge reversing its weekly drop, as a rebound in metals spurred gains for materials shares and investors awaited a report on China’s industrial profits.
The MSCI Asia Pacific Index added 0.1 percent to 134.60 as of 9:01 a.m. in Tokyo, with materials and telecommunication shares leading gains. The measure is poised to close the week little changed. Industrial metals surged Thursday after people familiar with the matter said China is stepping up its efforts to support the domestic industry, with the largest copper and nickel suppliers planning to meet this week to weigh their response to the slump in prices. Financial markets in the U.S. were closed Thursday for the Thanksgiving holiday.
“With regards to China, our sense is that there are still significant risks to the global economy but on the other side, that they’ve got the policy ammunition to dampen that risk,” said Chris Green, director of economics and strategy in Auckland at First NZ Capital Group Ltd.
Japan’s Topix index added 0.1 percent. The Nikkei 225 Stock Average climbed 0.2 percent to 19,983.66, closing in on 20,000 for the first time since August. The nation’s consumer prices excluding fresh food fell 0.1 percent in October from a year earlier, in line with economists’ estimates, according to a report released before the stock market opened Friday. A measure of inflation that also excludes energy rose 0.7 percent. The jobless rate fell to 3.1 percent, the lowest since 1995.
South Korea’s Kospi index rose 0.3 percent. Australia’s S&P/ASX 200 Index gained 0.4 percent, while New Zealand’s S&P/NZX 50 Index was little changed. Futures on Hong Kong’s Hang Seng Index added 0.4 percent in most recent trading, while contracts on the FTSE China A50 Index rose 0.3 percent.
China is due to publish figures on October industrial profits, which slipped 0.1 percent in September from a year earlier. Citic Securities Co. is being investigated by the market regulator because it allegedly violated rules on the supervision and administration of securities firms, the nation’s largest brokerage said in an exchange filing Thursday. Some of the firm’s top executives have already been placed under investigation.
Futures on the Standard & Poor’s 500 Index added 0.3 percent from Wednesday’s close. U.S. equity markets reopen Friday for a shortened trading day. Traders are now pricing in a 72 percent probability that the Federal Reserve will increase borrowing costs at its December meeting.
Next week sees policy decisions from the Reserve Bank of Australia and European Central Bank, before the U.S. reports payrolls figures for November. The International Monetary Fund’s board meets on whether to grant the yuan reserve-currency status, and members of the Organization of Petroleum Exporting Countries will gather in Vienna.
“Traders still need to take into consideration that the investment landscape could change significantly next week,” said Chris Weston, the chief markets strategist at IG Ltd., in an emailed note. “Moves in the U.S. dollar hold the key for all risk assets.” [Bloomberg]
FTSE Outlook and Prediction
We have dropped back a bit from the 6400 level since yesterdays close, with todays emphasis on Black Friday and the retail sector. Its also the day after Thanksgiving in the US which can often see a rise during the US session (share tips discussed over turkey?!). The pivot at 6373 didn’t act as much support overnight, so I think a decline towards the 6350 area where we have the bottom of the 30min channel and the 200ema (30min) at 6340. So, for today I think a decline then a rise towards the pivot at 6373, and possibly higher. However, if the 6350 level breaks then 6305 looks likely, so flip to short on a break of that. We also have the 10 day Bianca at 6310 so worth a long at this level.