Good morning. It initially looked far more positive yesterday with the FT100 approaching the 6000 level with strong retailers taking the lead on the back of strong trading updates. However the fragile market was pushed lower once Wall Street opened on a sharply falling oil price and further global economic concerns.
The positive for the bulls is that the close was above 5900 and this has held again during after hours trading.
A prolonged weakening UK Pound could perhaps be the next area of concern so this is one worth watching over the coming days.
US & Asia Overnight from Bloomberg
Asian stocks rallied from a three-year low, tracking a rebound in the U.S. amid speculation a selloff that erased more than $5 trillion from global equity values this year had gone too far. Oil rose for the first time in 2016, while the offshore yuan strengthened.
The MSCI Asia-Pacific Index climbed the most in four weeks as benchmarks in Japan and Hong Kong added more than 2 percent. U.S. index futures advanced after the Standard & Poor’s 500 Index rose for a second day. Treasuries took back some of the last session’s gains, which were spurred by crude’sdecline to below $30 for the first time in 12 years. The more positive sentiment diminished the appeal of haven currencies, with the yen retreating as Australia’s dollar appreciated.
Concerns over China and oil’s descent have dominated markets in 2016, with global stocks down around 6%The S&P 500’s rebound from its lowest level since September has provided a shot in the arm for equity markets, which have been beaten down in 2016 amid concern over China’s ability to manage its slowing economy and the impact of sliding crude prices. The panic seen in financial markets last week has receded since Chinese policy makers intervened to halt the yuan’s drop to a five-year low, reducing the risk of a currency war. A report showed the nation’s trade surplus unexpectedly widened last month as exports improved.
“We’ve seen some stability in the U.S. and other markets but sentiment will really depend on what’s happening in China with regard to the direction of their currency and economic data,” James Lindsay, an Auckland-based fund manager at Nikko Asset Management Co., which manages $160 billion globally, said by phone. “If we see continued weakness in the yuan, that will have a huge flow-on effect for the rest of the world.”
Stocks
The MSCI Asia Pacific Index climbed 2 percent as of 2:57 p.m. Tokyo time, halting a seven-day drop that marked its longest run of losses since August. Japan’s Topix index rallied from its lowest level since September, advancing 2.7 percent and Hong Kong’s Hang Seng Index rose 2.3 percent. Futures on the S&P 500 added 0.8 percent, after the benchmark gained 0.8 percent on Tuesday.
China’s trade surplus swelled to $60.09 billion in December from $54.10 billion in December, official figures show. Economists expected $51.3 billion, a Bloomberg survey showed. Exports fell 1.4 percent from a year earlier, the smallest decline since June. In local-currency terms, shipments increased 2.3 percent.
Commodities
West Texas Intermediate crude rose 1.2 percent to $30.81 a barrel, after slipping as low as $29.93 on Tuesday. It’s still lost 17 percent since the end of December.
American oil supplies fell 3.9 million barrels last week, the industry-funded American Petroleum Institute was said to have reported late Tuesday. Inventories probably expanded by 2 million barrels, according to a Bloomberg survey of analysts before the Energy Information Administration report Wednesday.
“The big picture for the market is still oversupply,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “It’s going to be a tough couple of months for prices, $30 oil is very painful.”
Copper climbed 0.9 percent in London, rebounding from its lowest close since April 2009.
“Prices were boosted by Chinese exports that were better than expected,” said Jia Zheng, a senior analyst with East China Futures Co. in Shanghai. The rebound will probably prove short-lived as demand remains weak in China, forcing some fabricators to suspend production before the Lunar New Year holiday in February, she said. [Bloomberg]
FTSE Outlook and Prediction
6015 and then 6055 are looking like the immediate resistance areas and if we repeat the pattern of the past few sessions we will rise this morning then drop this afternoon (and then probably bounce overnight again). We do have R1 at 5997 initially which will be the first hurdle for the bulls to jump, and with the price pushing above the 10 day Raff and Bianca channels I think that we are more than likely to have a dip back to within them at some point. Its almost like its being pumped higher and getting a bit ahead of itself….. The Dax rose above 10000 yesterday and has stayed there for the moment, and with gold dropping back below 1100 (closed that short far too early yesterday!) the general vibe is short gold, long equities. However, I wouldn’t be surprised if we get one more dip down, which would be worth getting long on. So, its watching 6000 really to see what happens there, the bulls will certainly be keen to break and hold above that this morning. Just looking at gold and interestingly there is decent support at 1082 on the daily where we have the 25ema. If gold does rise from this level then we might well see a dip in equities again, which would keep FTSE below the 6000.