Good morning. Well the long off the pivot didn’t really work yesterday morning, so flipping to short at 7060 was the right play as it turned quite bearish for a while. The bottom of the 10 day Raff at 6980 held well for a rise back to 7050 where prices have remained overnight. Twitter results last night were released early by “mistake” which saw 20% wiped off the share price at one point as they disappointed the market. Despite that the S&P managed to regain ground from its lows of 2095, though still short of the 2125 recent high. The ASX200 has had a pretty bearish Wednesday dropping 100, so I am kind of expecting the FTSE to be bearish too. In other news yesterday news of a US cargo ship being captured by Iran sent jitters through the market though turned out to be a non-US ship. UK GDP was lower at 0.3%, the weakest pace in 3 years, though not surprising really as we await the election results, and shows that the “recovery” is still pretty fragile, here and globally.
US & Asia Overnight from Bloomberg
Asian shares retreated, led by declines in Sydney and Jakarta. The dollar traded near a two-month low amid speculation that the Federal Reserve will keep interest rates near zero for longer, and crude oil slipped before U.S. stockpiles data.
The MSCI Asia Pacific excluding Japan Index dropped 0.6 percent by 1:29 p.m. in Hong Kong, as Australia’s S&P/ASX 200 Index fell 1.6 percent and the Jakarta Composite Index plunged 2.6 percent. Standard & Poor’s 500 Index futures declined 0.1 percent. The Bloomberg Dollar Spot Index was little changed after sinking to its lowest level since February on Tuesday. Oil in New York fell 0.3 percent before a report that may show record stockpiles swelled further.
The dollar gauge is headed for its first monthly retreat since June as mixed economic data prompt economists to push back estimates for when the Fed will lift rates for the first time since 2006. The U.S. central bank will comment on monetary policy later today, while Thailand is tipped to keep key rates unchanged. Japanese markets are closed for a holiday.
“Because of the poor recent economic data, the market is pretty much pushing out to 2016 now before the Fed moves,” said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. “The big sell-off in the U.S. dollar that we’ve seen over the last few weeks has reflected how long the market was. I’d probably be leaning towards more of a pause in the dollar-bull trend rather than a complete reversion of it.”
Rates Survey
Seventy-three percent of economists said the first U.S. rate increase since June 2006 will come in September, according to a Bloomberg News survey conducted April 22-24. That’s up from 37 percent in a March survey, when a majority predicted an increase in June or July.
Banks were the biggest drags on the Sydney benchmark gauge, with Commonwealth Bank of Australia down 1.6 percent and Westpac Banking Corp. sliding 2.1 percent. The Aussie dollar traded close to 80 U.S. cents, defying efforts by Reserve Bank of Australia Governor Glenn Stevens to talk down the currency as a mining boom wanes.
“There’s a temptation to take profits in these banks that have been well bid for a long time now,” Stan Shamu, Melbourne-based market strategist at IG Ltd., said by phone. “That yield trade is looking somewhat exhausted. There’s growing concern that Stevens doesn’t want to cut rates and that expectation of a May cut is coming out of the market.”
Jakarta Slides
Hong Kong’s Hang Seng Index fell 0.3 percent and the Hang Seng China Enterprises Index, a gauge of Chinese shares in the city, slid 0.7 percent, falling a second day. The Shanghai Composite Index fluctuated amid concern slowing economic growth is undermining earnings after companies from Anhui Conch Cement Co. to Yanzhou Coal Mining Co. reported declines in profit.
Indonesia’s benchmark index extended a five-day, 4 percent decline as investors weighed falling corporate earnings and Australia’s warning that a mass execution of foreign convicts will damage relations.
The value of global equities climbed to a record $72.2 trillion on Monday amid a wave of global central bank easing and receding concern that the Fed will raise borrowing costs while the U.S. economy remains fragile.
U.S. consumer confidence was weaker than expected in April, data Tuesday indicated, with a report Wednesday projected to show growth in the world’s largest economy slowed in the first quarter. Gross domestic product in the U.S. expanded 1 percent in the first three months on an annualized basis, down from 2.2 percent in the last quarter of 2014, according to economists surveyed by Bloomberg.
Euro, Dollar
While investors mull the course of U.S. policy tightening, central banks from Europe to Asia are easing to prop up growth and stimulate inflation. Better-than-estimated U.S. corporate earnings have also helped the Standard & Poor’s 500 Index up 2.3 percent this month.
The euro traded at $1.0966 following a four-day, 2.4 percent surge. The Bloomberg dollar gauge, which tracks the U.S. currency against 10 major peers, slipped 0.6 percent Tuesday to its lowest level since Feb. 25.
Gold held near a three-week high, with bullion for immediate delivery trading at $1,210.41 an ounce from $1,212.17 on Tuesday, according to Bloomberg generic pricing. The metal climbed for a second day on April 28, gaining to $1,215.16, the highest since April 7.
The yen was little changed at 118.85 per dollar after a 0.2 percent climb on Tuesday. New Zealand’s dollar slipped 0.2 percent to 76.98 U.S. cents.
Oil
West Texas Intermediate crude fell for the third time in four days, slipping to $56.89 a barrel before data projected to show that U.S. supplies topped 490 million barrels last week for the first time in more than 80 years. Brent oil dropped 0.3 percent to $64.45 a barrel.
Crude stockpiles probably rose by 2.9 million barrels last week, according to a Bloomberg survey of energy analysts. Inventories expanded the prior 15 weeks to 489 million barrels, the highest level in weekly U.S. Energy Information Administration data that started in August 1982.
E-mini futures on the Nasdaq 100 Index declined 0.2 percent after Twitter Inc. plunged on Tuesday.
Twitter slid 18 percent, the most since February last year, after revenue fell short of estimates in the first quarter, even after the company introduced new products and tweaked features to attract more people. Twitter was slated to report earnings after U.S. markets closed, though Selerity Inc., a financial news service, disclosed the results shortly after 3 p.m. in New York.
Corn futures in Chicago fell for an eighth day, the longest losing run since July, and traded near the lowest level since November as drier weather favored planting in the U.S., the world’s biggest producer. Corn declined 0.2 percent to $3.6375 a bushel. [Ref]
FTSE Outlook
If todays ASX (Australia stock exchange) action is anything to go by we are on for a bearish day on the FTSE. The bottom of the 10 day Raff at 6981 held well yesterday but any breach of this will most likely see 6900 or maybe even lower. That said, the daily chart is still bullish for the moment with the 10ema above the 25, and the Raffs rising. Bianca resistance on the daily chart is at 7119 initially. We are back to watching the Fed for clues on interest rates, though weaker consumer confidence yesterday reinforces the need to keep rates low. Todays pivot is 7039 so initial support here, but of more interest is the resistance at around the 7055, 7060 area which looks to be worth a short for a decline to the 6995 bottom of the Bianca channel area. So, short the rallies mode for the moment! As mentioned above the S&P has regained some ground but will need to break 2125 for a push to 2140 – from there, if reached, I expect some larger downside.
Support below the Bianca channels is 6981 (yesterday low) and then 6890 for the bottom of the 20 day Raff and 6864 where we have the bottom of the 50 day Bianca. Resistance is 7119 for today, though I dont think we will go higher than that, and then 7208 and 7257.