Asia retreats 6186 support 6285 resistance

Support 6220 6205 6190 6186 6157
Resistance 6241 6248 6252 6288 6317
Good morning. That was an interesting day yesterday, I really expected the 6250 area to hold as better support and see some bulls hop onto the rising trend there. A telephone poll that showed the leave camp in the lead with the Brexit vote scuppered the rally though, having had the polls show the remain camp in the lead last week. As if polls are ever accurate, but shows how jittery the market is over the whole EU vote. Will find out in a few weeks! China’s purchasing managers’ indexes for May added to evidence that growth remains subdued, whilst in the US the market is looking for anything that may upset an increasingly expected July rate hike.

US & Asia Overnight from Bloomberg
Asian stocks retreated with commodities and the yuan weakened as Chinese manufacturing data painted a picture of lackluster growth in the world’s second-largest economy. Australia’s dollar surged to a two-week high after economic expansion beat estimates.

The MSCI Asia Pacific Index snapped a five-day winning streak as Japan’s Topix index retreated from a one-month high. Copper fell by the most in about three weeks, while crude oil slipped below $49 a barrel before an OPEC meeting on Thursday. The yuan approached a five-year low reached in early January, when concern about China’s currency policy roiled global financial markets. South Korea’s won weakened after disappointing trade data and the Aussie strengthened against all of its major peers.

China’s purchasing managers’ indexes for May added to evidence that growth remains subdued after the economy expanded last year at the slowest pace in more than two decades. Manufacturing gauges for the euro area and the U.S. are also due Wednesday, with the latter likely to be closely watched following a surge in speculation that the Federal Reserve will raise interest rates as early as this month. Reports Tuesday showed American consumer spending climbed in April by the most in almost seven years, while confidence fell.

“U.S. data is incredibly important at the moment as the market is looking for anything that may upset an increasingly expected July rate hike,” said Angus Nicholson, a markets analyst in Melbourne at IG Ltd. “Last night did not provide that, with most coming in largely in line with what the market was expecting.”

China’s official manufacturing purchasing managers index for May was 50.1, just above the dividing line between improvement and deterioration. A comparable indicator for Japan was the lowest in at least three years and Prime Minister Shinzo Abe said he will delay a planned increase in the country’s sales tax by more than two years. U.S. figures are likely to show factory activity barely expanded in May, a Bloomberg survey shows. Australia’s gross domestic product rose 1.1 percent in the first quarter from the prior three months, a bigger gain than economists forecast.

Stocks
The MSCI Asia Pacific Index fell 0.1 percent as of 1:41 p.m. Tokyo time, after climbing 3.3 percent over the last five trading days. Benchmarks declined in Australia and Japan, while the gauges in Hong Kong and Shanghai were little changed.

Softbank Group Corp. climbed more than 2 percent in Tokyo to its high for the year after announcing plans to sell at least $7.9 billion of its stake in Alibaba Group Holding Ltd.

Futures on the S&P 500 gained 0.1 percent, after losses among energy producers kept the U.S. benchmark in negative territory on Tuesday.

Currencies
The Bloomberg Dollar Spot Index fell less than 0.1 percent, after a 3.7 percent surge in May that marked its biggest monthly gain since September 2014. The odds of the Federal Reserve raising interest rates in June almost tripled last month to 34 percent, while the chance of a move by July roughly doubled to 54 percent, Fed Funds futures show. The euro weakened 0.1 percent versus the greenback before a European Central Bank policy meeting on Thursday.

The yuan dropped 0.2 percent, closing to within 0.1 percent of a five-year low. It slumped 1.5 percent in May, the biggest loss since an August devaluation, and exchange-rate policy may be on the agenda when the U.S. and China hold an annual economic meeting next week.

“Today’s PMI reports and the recent dollar strength both point to further weakening pressure on the yuan,” said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. “The PBOC may also want to let the currency follow market forces to weaken ahead of the U.S.-China economic dialogue later this month.”

Australia’s dollar strengthened 0.6 percent. The GDP report “reduces the risk” of the central bank adding to May’s interest-rate cut anytime soon, said Gareth Berry, a foreign-exchange and rates strategist in Singapore at Macquarie Bank Ltd. New Zealand’s currency rose 0.3 percent after a gauge of the nation’s terms of trade increased by more than economists forecast.

The yen strengthened 0.1 percent, after sliding 3.8 percent in May. Prime Minister Abe will also announce a “large” extra budget on Wednesday, according to the Yomiuri Shimbun newspaper.

Commodities
West Texas Intermediate crude fell 0.7 percent to $48.77 a barrel, after climbing for a fourth month in May. The Organization of Petroleum Exporting Countries is unlikely to reach an agreement limiting production at this week’s meeting in Vienna as the group sticks with Saudi Arabia’s strategy of squeezing out rivals, according to analysts surveyed by Bloomberg. The global surplus that has caused prices to slump since 2014 is correcting itself, the oil minister of the United Arab Emirates said Tuesday.

Copper declined 1.5 percent in London, while zinc and lead were down at least 0.8 percent. Gold was little changed, after sliding more than 6 percent in May.

Bonds
Japan’s 20-year bonds declined, pushing their yield up by the most in three weeks to 0.265 percent, after the central bank scaled back purchases of super-long tenors in its debt-buying plan for this month. Notes due in 30 years and 40 years also declined.

Australian government debt due in a decade fell for a third day, pushing its yield three basis points higher to 2.34 percent. Similar-maturity U.S. Treasuries were little changed and yielded 1.85 percent.

South Korea’s three-year bond yield dropped six basis points to 1.44 percent, below the Bank of Korea’s record-low benchmark rate of 1.5 percent. Data Wednesday showed exports contracted for a 17th straight month, contributing to the smallest current-account surplus since June 2014, and Tuesday’s release of minutes from the central bank’s last policy meeting showed showed one of the seven board members saw the need for borrowing costs to be lowered in the “near term.” [Bloomberg]

FTSE 100 Outlook and Prediction

As its the first of the month we may see an initial rise towards the pivot at 6240, from the 6220 area, which is showing as support on the 10min chart at the moment. The 30min chart is still bearish so a test of the bottom of the 10 day Bianca at 6186 is distinctly possible, though the daily chart is also showing support at 6205 (25ema) and the bottom of the Raff channel here at 6220 first. Its certainly a bit tricky at the moment for the FTSE with the whole Brexit thing weighing on traders minds, as we saw from the reaction to that poll yesterday. There is a weak rising channel on the 30min with support at 6213, but also a declining channel, support at 6218, resistance at 6280. Mixed bag! I have mainly gone for the initial rise as we often see an influx of new money at the start of the month, but whether it has enough momentum to push us up towards 6285 remains to be seen. I have put a short here anyway, as its showing as decent resistance on the 2 hour chart with the trend coral indicator now going red. The bulls will have to be quick out the blocks today, otherwise we are likely to see a dip to the 6186 area.