Good morning. The FT100 fell sharply at the open as China accelerated the depreciation of the Yuan and the Chinese stock market hit another 7% circuit breaker on steep falls leaving their market closed after only 30 minutes. As China imports so much from the rest of the world its economy is now important enough to send shock waves around the world when things start to look negative. The one positive note is that the circuit breaker mechanism is being suspended and therefore Thursday-Friday night the Chinese market will be allowed to trade for a full day. This may prove volatile but at least it will clear any sellers who wish to get out of the Chinese stockmarket …so this could be the bottom and therefore a base to build on into 2016. The FT100 went ex-dividend by 0.9 points so this had little effect.
US & Asia Overnight from Bloomberg
Asian stocks advanced in volatile trading, with the regional measure paring its steepest weekly slump since 2011.
The MSCI Asia Pacific Index reversed an early decline after China refrained from another cut to the yuan’s reference rate, with the equities gauge rallying as much as 0.9 percent. The rebound evaporated within 15 minutes as investors grappled with the outlook for financial markets after more than $4 trillion was wiped from global stocks in the first four days of this week. By 12:09 p.m. in Tokyo, the measure was 0.3 percent higher.
The People’s Bank of China set the currency’s reference rate little changed Friday after a falling yuan raised concern a slowdown in the region’s largest economy is deepening. Chinese shares swung from gains to losses to gains again after the government abandoned new circuit breakers blamed for exacerbating the worst-ever start to the nation’s equities.
“Nobody can judge what the Chinese government wants to achieve,” said Liu Yang, Hong Kong-based chairwoman of Atlantis Investment Management. “The direction at least is to try and stabilize the market. You need to take a wait-and-see attitude.”
The MSCI Asia Pacific Index’s advance comes after a four-day, 6 percent slide. Trading surged across the region, with volume for the Nikkei 225 Stock Average and Hong Kong’s Hang Seng Index more than 50 percent above their 30-day averages.
Japan’s Topix index gained 0.3 percent, reversing an earlier loss of as much as 1.2 percent. Australia’s S&P/ASX 200 Index slid 0.6 percent and New Zealand’s S&P/NZX 50 Index fell 1.1 percent. South Korea’s Kospi index slipped 0.1 percent.
China Stocks
The Hang Seng Index rose 0.9 percent, paring its decline for the week to 6.3 percent, and the Hang Seng China Enterprises Index of mainland firms trading in Hong Kong climbed 1.3 percent. The Shanghai Composite Index jumped 1.6 percent, trimming its weekly loss to 10 percent.
China has driven market sentiment this week with a series of interventions in the stock and currency markets. Having introduced a circuit breaker Monday, the regulator scrapped it, confusing investors as to their next policy move and adding to investor sentiment that authorities are improvising as they try to stabilize markets and shore up the economy.
Investors also will be watching closely Friday’s U.S. jobs report. In the face of crumbling financial markets, the December employment data will help signal the sturdiness of the economy. Futures on the Standard & Poor’s 500 Index rallied 0.9 percent Friday. [Bloomberg]
FTSE Outlook and Prediction
We have NFP (Non-Farm Payrolls is a measure of the number of paid part-time or full-time workers in the US, excluding the farming sector) news out at 13:30 today which will be a fairly big deal, forecast to be 200k versus 211k last time, as this will give a guide as to the “health” of the US economy at the moment. We also have the Unemployment Rate out at the same time, forecast to remain at 5%. After the bearish and volatile start to the month this might provide a bit of support for the bulls who can spring a bit of upside from these lower levels. Its actually looking alright from the charts for a rise from the 5933 area so if this holds then we might see a rise to 6000 today, and possibly higher. The S&P has regained a bit of ground from its low yesterday (was a bit early closing that 1975 short in the afternoon, I didn’t expect it to dip so much a second time). There could be an initial dip as the daily pivot is at 5972 and we also have the top of the declining channel on the 30min chart here, so if we do then hopping on a long at 5935 could be worth going for. However, its NFP Friday so likely to be a little odd, so adjust your risk accordingly. Generally, I am looking at it being a fairly bullish sort of day, certainly till NFP – whatever that news is will determine how the afternoon plays out.