FTSE 100 Support 6876 6865 6864 6815 6809 6785
FTSE 100 Resistance 6898 6901 6915 6930 6953 6983
Good morning. I hope you had a good weekend. Fairly flat on Friday with the 6914 short being a bit of a slow burner. However, the market stayed below that level and has dropped off a bit overnight after a weaker Asia session – the bears will be keen to break 6880 today. Fridays drop in oil prices weighed on markets, and kept the FTSE 100 from climbing, though it held up pretty well considering the Dax and SPX fell steadily during the day.
US & Asia Overnight from Bloomberg
Asian stocks dropped by the most in two weeks, while haven assets including the yen and sovereign bonds rose as investors weighed prospects of major oil producers agreeing output curbs at talks this week. Crude rebounded following its steepest drop in two months.
The MSCI Asia Pacific Index extended the last session’s retreat from a 14-month high, while futures foreshadowed declines in U.S. and U.K. equities. Oil recouped less than a fifth of Friday’s slump amid indications Saudi Arabia will agree to cut output to January levels when OPEC members and Russia meet Wednesday in Algiers. Turkey’s lira led losses among emerging-markets currencies after Moody’s Investors Service cut the nation’s debt rating to junk.
Friday’s plunge in oil prices knocked investor sentiment, which had been improving after central bank meetings in the U.S. and Japan bolstered expectations that monetary policies in the world’s major economies will remain loose. Money managers increased their short positions in crude by the most in more than a year during the week ended Sept. 20, reflecting skepticism that major producers will reach an accord in Algiers after similar discussions in Doha failed in April.
“Oil spot prices will have a big influence on where equities markets are going to trade for the early part of the week,” said Angus Nicholson, a Melbourne-based analyst at IG Ltd. “There are uncertainties over whether the OPEC members can reach an agreement.”
American politics are likely to be high on investors’ minds on Monday as the first of three televised debates between presidential candidates Hillary Clinton and Donald Trump takes place. Central bankers will be fairly active, with speeches due from the heads of the Bank of Japan and the European Central Bank, as well as regional Fed chiefs for Dallas and Minneapolis.
The MSCI Asia Pacific Index was down 0.8 percent as of 1:54 p.m. Tokyo time, after gaining 3.6 percent last week. Hong Kong’s Hang Seng Index fell by the most in two weeks and Taiwan’s Taiex index retreated from a 14-month high.
Chinalco Mining Corp. International jumped as much as 28 percent in Hong Kong after parent company Aluminum Corp. of China Ltd. offered to buy out the unit’s minority shareholders. Hyundai Merchant Marine Co., South Korea’s second-largest container line, surged as much as 12 percent in Seoul after the company was said to be looking at some assets of troubled rival Hanjin Shipping Co. for a possible acquisition.
Futures on the S&P 500 Index fell 0.1 percent following a 0.6 percent drop in the benchmark on Friday, when U.S. energy stocks slumped as oil sank 4 percent in New York amid speculation the Saudis had dismissed prospects of a deal aimed at stabilizing crude prices. Contracts on the U.K.’s FTSE 100 Index slid 0.4 percent.
Crude oil rose 0.7 percent to $44.79 a barrel in New York. Algeria’s Energy Minister said Saudi Arabia, the world’s No. 1 oil exporter, has offered to cut production to January levels to help convince other major producers to agree output curbs this week in Algiers.
Gold fell 0.3 percent, after climbing 2.1 percent last week. The precious metal’s price swings may become more severe in the final quarter owing to the U.S. presidential election and an expected interest-rate increase by the Fed, according to Citigroup Inc.
Nickel declined 1 percent in London, pulling back from a one-month high. Investors are awaiting the result of an environmental audit in the Philippines, which may close mines in the world’s largest supplier. Copper retreated 0.2 percent from a seven-week high.
The MSCI Emerging Markets Currency Index fell by the most in two weeks as most developing-nation currencies lost ground versus the greenback. The Philippine peso slid to a seven-year low as concern about the policies of President Rodrigo Duterte spurs an exodus of foreign capital. Overseas investors were net sellers of the nation’s shares for the 22nd day in a row on Friday.
The lira sank to a seven-week low versus the dollar after Moody’s cut Turkey’s sovereign rating to Ba1 from Baa3 on Friday, citing risks related to the country’s external financing needs and a weakening of credit fundamentals. The decision marked the end of a review following an unsuccessful coup attempt in July.
The Bloomberg Dollar Spot Index was little changed following a 0.6 percent loss last week. The yen fell less than 0.1 percent to 101.07 per dollar.
Former Japanese top currency official Eisuke Sakakibara forecast on Monday that Japan’s currency will slowly strengthen, saying in a Bloomberg TV interview that he wouldn’t be surprised if it reaches 90 by the end of next year. Sakakibara, dubbed “Mr. Yen” for his ability to influence the exchange rate while a senior Ministry of Finance bureaucrat in the 1990s, correctly predicted the currency’s advance this year from near 120 to beyond 100.
Australian government debt due in a decade rose for a third session, pushing their yield down by three basis points to 1.97 percent. Rates on similar-maturity New Zealand bonds fell for a fourth day.
Ten-year Treasuries were little changed after their yield slid seven basis points last week to 1.62 percent. The Fed refrained from hiking interest rates on Sept. 21 and lowered its projections for the number of increases in 2017 and beyond.
Still, expectations are that U.S. borrowing costs will be raised by the end of December and analysts see the 10-year Treasury yield climbing to 2.2 percent by the end of next year. Foreign central banks have reduced their holdings of U.S. sovereign debt for three consecutive quarters, the most sustained pullback on record, and declines are accelerating, Fed data show. Diam Co., with $168 billion in assets under management, has also been shrinking its positions. “I’m not confident that central banks will keep loose monetary policy going forward,” said Hajime Nagata, one of the bond investors for the company in Tokyo. Long-term yields may rise around the world, and Diam trimmed its holdings of benchmark Treasuries about a month ago, he said. [Bloomberg]
FTSE 100 Outlook and Prediction
For today I think we might see a bit of the Asian weakness start our day off with a drop down to the 6865 level where we have the bottom of the 10 day Bianca channel. We also have the 200ema on the 30min chart here, so if this level holds then we should get a climb. I am thinking that we might even manage to get as far as the 6930 level which is resistance on the 2 hour chart, with 6953 above that which is the 20 day Bianca channel. The 2 hour chart is still bearish from Friday, and the 6915 level has seen a bit of a reaction to the downside so far, albeit fairly slow. The 10min chart is bearish to start with, hence thinking about the dip to start our week off, and the usual pattern has been bullish Monday, bearish Tuesday recently. Might get the same again today.
If the bears break the 6865 level then 6809 and 6785 are the next support areas to watch, while a move above 6954 will try and target 7000. On Friday it looked like 6880 will be key (might hold yet) but that 10 day channel at 6865 looks better for support today.