Good morning. The FT100 managed to break the run of 8 losing days in a row with a sharp recovery taking it back above the 6000 level. It is unclear whether this is just short covering before the FED meeting later (7pm UK) or genuine buyers coming back in the market. Today will probably be a “wait and see” day with any action after hours this evening and Thursday. The hope is that the buyers return and a “Santa” rally materialises on Thursday, however the markets like to shake out weak long positions so could still throw in a spike down to clear a few tight stops. Either way we should see a fairly big range today.
Most sectors moved to the upside with supermarkets among the best leaders on positive analysis of Sainsbury which also pulled up Tesco and Morrison. Housebuilders also had good gains but commodity shares still were some of the weakest which shows the rally is still not secure as this sector would be expected to improve on a better economic outlook.
US & Asia Overnight from Bloomberg
Asian stocks rose, following a rally in U.S. shares, as crude oil prices jumped and investors awaited the Federal Reserve’s first interest rate increase in almost a decade.
The MSCI Asia Pacific Index rose 1.3 percent to 128.31 as of 9:05 a.m. in Tokyo, its first advance in seven days. The gauge lost more than 4 percent in the previous six sessions, reaching the lowest level since Oct. 2. The Standard & Poor’s 500 Index capped its first back-to-back gains in more than a month as energy companies led a rally with crude oil.
Investors are shrugging off concerns over commodities and junk bond markets to focus on the Fed’s policy decision due in less than 24 hours, with traders pricing in 78 percent odds that rates will be raised for the first time since 2006, ending the era of near-zero borrowing costs.
“Markets had time to prepare for this day, with investors winding back risks ahead of the event,” Tim Schroeders, a portfolio manager who helps oversee about $1 billion in equities at Pengana Capital Ltd. in Melbourne, said by phone. “What happens after the Fed rate hike is difficult to tell, especially since we’re coming into a quiet period around Christmas and New Year.”
U.S. data on Tuesday reinforced expectations for a gradual increase in rates, with the cost of living holding steady in November, underscoring scant inflation that is well below the policymaker’s goal. Tightening policy would solidify the Fed’s divergence from central banks in Europe and Japan.
Topix Gains
Japan’s Topix index increased 1.7 percent, it biggest gain in more than a month, as the yen weakened. Australia’s S&P/ASX 200 Index jumped 1.6 percent, while New Zealand’s S&P/NZX 50 Index climbed 0.6 percent. South Korea’s Kospi gained 1 percent. Markets in China and Hong Kong have yet to start trading.
China’s Shanghai Composite Index slipped 0.3 percent on Tuesday as trading volumes fell 34 percent below the 30-day average. Property developers advanced after the Communist Party’s Politburo vowed to stabilize the real estate market.
E-mini futures on the Standard & Poor’s 500 Index were little changed after the underlying measure climbed 1.1 percent on Tuesday. West Texas Intermediate rose 2.8 percent, adding to Monday’s 1.9 percent gain. Crude futures resumed losses Wednesday, slipping 1.2 percent. [Bloomberg]
FTSE Outlook and Prediction
Well here we are, Fed day in December and will they raise rates as has been inferred on previous occasions? Either way I am expecting that we will see a fairy big range today, quite possibly with a dip down to stop out the weak longs holding from sub 6000. That said, there is some decent support at 5993 area so if we dip here this morning this could be worth a long here. Resistance is at 6110 to start with 6175 to 6190 higher up. The news is at 7pm so its going to get pretty spikey around then so be aware of that. We also have a small dividend today, 0.8, which will be applied to any open positions at either 16:30 or 9pm depending on platform. We have had a decent rise since the 5880 low the other day, so some profit might want to get banked heading towards the news as well, and by tomorrow we should see if this was short covering/dead cat bounce or the start of a more sustainable rally. The orange arrow not he chart coincides with the Fed news so could be anything though we may well see a dip then rise back.