Support 6264 6247 6229 6225 6197 6145
Resistance 6285 6297 6312 6332
Good morning Nick. Bit of a weird one on the FTSE yesterday with a fairly narrow range and not much happening at the key levels. Mostly down to the expectation that the UK will now remain in the EU which also helped the pound gain against other currencies. With the US and the UK closed on Monday we will probably have more of the same today. We also have Yellen giving a speech later at 15:30 – dovish or hawkish? The highlight yesterday was the gold long getting some decent points though it then fell back to the 1220 level, just after we closed. Was $1300 a flash in the pan?
US & Asia Overnight from Bloomberg
Asian equities rose for a third day, supported by prospects for stimulus in China and Japan. A gauge of dollar strength held near a one-week low before a speech by the head of the Federal Reserve, while crude oil retreated with gold.
The MSCI Asia Pacific Index was headed for its first weekly gain since April. Japan’s Topix climbed to a one-month high as local newspapers reported the potential postponement of a sales-tax increase. The yen weakened as data showing a drop in Japan’s consumer prices reinforced expectations the Bank of Japan will add to record monetary stimulus. The British pound was the biggest gainer among major currencies this week as polls showed growing support for the U.K. to remain in the European Union before a June referendum. Oil pared its weekly advance and gold slid for an eighth day.
Investor sentiment picked up this week, with global stocks and emerging-market currencies paring their losses for May. Leaders from the Group of Seven nations are meeting in Japan and are set to issue a communique saying they’ve strengthened their economies sufficiently to avoid a crisis. China said Thursday it has room to borrow more to finance spending needed to shore up growth and Asahi newspaper reported that Japan will postpone a planned sales-tax hike. Fed Chair Janet Yellen is due to speak Friday, after a string of her colleagues have indicated their willingness to tighten policy.
“We are still a little cautious,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion. “Yellen is likely to continue with the rhetoric of wanting to hike and that’s their plan. Equity markets still offer value on a medium-term basis and it’s certainly the only place where you’re getting any sort of yield.”
Yellen’s appearance is impacting traders’ long weekend plans, read more here.
Jeffrey Gundlach, chief executive of DoubleLine Capital LP in Los Angeles, said he expects a dovish speech from Yellen and predicts the Fed will refrain from raising interest rates in June unless traders in the futures market assign a probability of at least 50 percent to such a move. The odds pulled back to 28 percent on Thursday from 34 percent in the prior session, according to Fed Funds futures.
Japan’s core consumer prices fell 0.3 percent in April from a year earlier, following a similar decline the previous month, data showed Friday. Taiwan joins the U.S. in posting an update on first-quarter gross domestic product and a gauge of American consumer confidence is also due. Colombia’s central bank will probably raise its key rate for a ninth straight month to help contain inflation. Financial markets in the U.S. and the U.K. will be closed Monday for holidays.
The MSCI Asia Pacific Index added 0.3 percent as of 1:50 p.m. Tokyo time, set for a 1.8 percent weekly advance. Benchmarks rose in Tokyo, Sydney and Singapore, while declines were seen in Hong Kong and Shanghai.
The Shanghai Composite Index was poised for its sixth weekly loss in a row, the longest losing streak in almost four years. Data on Friday showed industrial companies’ profit growth slowed to 4.2 percent in April from 11 percent the previous month. The finance ministry said the government’s debt is equivalent to 39 percent of GDP, relatively low by global standards, and there’s scope for more leverage.
Lenovo Group Ltd. fell to its lowest since 2011 in Hong Kong after the company announced revenue and earnings that fell short of analysts’ estimates. Toshiba Corp. jumped 10 percent to this year’s high after JPMorgan Chase & Co. upgraded its recommendation on the stock. Hyundai Merchant Marine Co. surged as much as 30 percent after Korea Development Bank said the company has made progress in negotiating discounts on leased vessels as part of a debt revamp plan.
Futures on the S&P 500 Index were little changed, after the gauge ended Thursday near to a one-month high. Evidence is mounting the economy is solid enough to merit Fed action, with a measure of data surprises surging to the highest since the start of last year.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after losing 0.2 percent in each of the last two trading sessions. The yen weakened 0.1 percent versus the dollar, trimming its weekly gain to 0.2 percent.
The MSCI Emerging Markets Currency Index rose 0.4 percent this week, snapping a run of three weekly losses. South Korea’s won and Taiwan’s dollar were Asia’s best performers, strengthening at least 0.7 percent during the period.
The currencies of oil-exporting nations were buoyed this week by an increase in crude prices. Canada’s dollar appreciated 0.9 percent, while the Russian ruble jumped 1.4 percent.
The pound climbed 1.1 percent this week. A poll by former Conservative lawmaker Michael Ashcroft showed almost 65 percent of voters believe the U.K. will remain in the EU after a June 23 referendum.
West Texas Intermediate crude slipped 0.7 percent to $49.12 a barrel. It’s gained about 3 percent this week, buoyed by a drop in U.S. oil inventories and output, and exceeded $50 in the last session for the first time this year. OPEC is unlikely to set a production target when it meets June 2 as it sticks with Saudi Arabia’s strategy of squeezing out rivals, according to analysts surveyed by Bloomberg.
Gold fell as much as 0.7 percent to a three-month low of $1,211.68 an ounce. Bullion has retreated this month as speculation mounted that the U.S. will raise borrowing costs as early as June, a move that would erode the appeal of non-interest-bearing assets.
“Gold could test $1,200, a scenario that will grow more likely if the market consensus around Fed tightening builds,” said Jordan Eliseo, Sydney-based chief economist at trader Australian Bullion Co.
Copper and aluminum rose to two-week highs, while zinc gained ground for a third day. Iron-ore futures in Dalian, China, slid to a three-month low.
The yield on U.S. Treasuries due in a decade rose one basis point to 1.4 percent, while that on similar-maturity Japanese debt fell one basis point to minus 0.12 percent.
Societe Generale SA sold 120 billion yen ($1.1 billion) of Samurai bonds Friday, the biggest deal this year in the Japanese yen debt market for overseas issuers. The issuance included seven-year notes at a yield of 0.28 percent. Toyota Motor Corp. sold 20-year yen bonds at a yield of 0.343 percent.
The cost of insuring corporate bonds against non-payment in the Asia-Pacific region is set for a third weekly drop, the longest streak of declines in two months. The Markit iTraxx Asia index is down four basis points since last Friday at 141 basis points, according to prices from Australia & New Zealand Banking Group Ltd. and data provider CMA. [Bloomberg]
FTSE 100 Outlook and Prediction
FTSE 100 Prediction
I imagine a lot of people will remain fairly noncommittal today ahead of the long weekend here and in the US, so we will probably have a fairly low volume day. Looking at the chart at the moment I can see a rise to 6302 where we have R2 and also a rising 30min channel and also just above the 20 day Bianca channel at 6297. As such it might well be worth a short here as the bulls might start taking some profit here from the 6110 longs. Above this we also have the top of the 20 day Raff at 6310. Support wise, we have the daily pivot at 6265 which has held well overnight, then 6247 for S1 and the 200ema on 30min and S2 at 6225 – a level that will more than likely hold if seen. So, I am going for a rise towards 6300 this morning then a slow drift back down this afternoon. It will be quite interesting to see if the bulls can break 6300 and if they do then 6332 is the top of the 10 day Bianca. Obviously for the 6302 short I hope they don’t!