Good morning. The markets were on a negative note yesterday with weaker than expected UK GDP figures followed by weak US consumer confidence figures, which led to moderate falls for the FTSE and DOW. Sectors to suffer were cyclicals with commodities and engineers affected the most. Today is US interest rate decision day (6pm) and this may mean the markets remain on hold until the meeting is out the way. Out of yesterdays trades the S&P short was the highlight, I closed it at 2063 however those that held saw it eventually run to the target at 2060, from where it has bounced quite well.
US & Asia Overnight from Bloomberg
- S&P 500 index declines Tuesday as energy stocks slide
- Traders see a 4% chance U.S. central bank will raise rates
Asian stocks followed U.S. shares lower as material companies led declines and investors awaited a Federal Reserve decision on monetary policy.
The MSCI Asia Pacific Index slipped 0.2 percent to 135.64 as of 9:01 a.m. in Tokyo. Decisions from the Fed on Wednesday and the Bank of Japan on Friday come after China cut interest rates last week and European officials signaled a willingness to add to stimulus, helping extend this month’s equity rally. The Fed kept rates near zero last month, opting to hold off for a better read on the impact of weaker growth in China and lackluster inflation.
“I don’t think the Fed is going to risk tightening policy this year,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees about $112 billion, said by phone. “It looks like markets have stalled but we still have some cash and if markets pull back we are using that as a buying opportunity. We’re starting to see the pressure abating on earnings.”
Japan’s Topix index added 0.1 percent and South Korea’s Kospi index lost 0.1 percent. Australia’s S&P/ASX 200 Index retreated 0.5 percent and New Zealand’s S&P NZX 50 Index gained 0.1 percent.
While traders are pricing in a 4 percent chance of the Fed raising rates on Wednesday, they are seeking indications from the meeting on the trajectory of borrowing costs and the central bank’s appraisal of the economy. March is the first month for which traders project at least even odds of a boost.
Darker Outlook
Uneven economic data in the U.S. has meant a murkier outlook on how growth will fare under higher rates. A report Tuesday showed orders for business equipment unexpectedly declined in September as tepid global markets gave American companies little reason to expand. Another report showed consumer confidence fell in October to a three-month low, while a separate gauge showed home prices in 20 cities rose at a faster pace in the year ended August.
“Markets fear the Federal Reserve could topple last week’s central bank stimulus-inspired rally,” said Jasper Lawler, a London-based market analyst at CMC Markets Plc. “Activity’s subdued again. A number of disappointing economic reports minimize the already unlikely probability of a Fed rate-rise on Wednesday.”
E-mini futures on the Standard & Poor’s 500 Index were little changed. The underlying gauge lost 0.3 percent on Tuesday amid mixed earnings reports. Apple Inc. advanced in after-hours U.S. trading as quarterly profit and sales exceeded analysts’ predictions. [Bloomberg]
FTSE Outlook
As mentioned above we will mostly be waiting for the Fed news later on about interest rates, so we may well get a slow drifting day. Been the story of the week so far though! We have the 10 day Bianca channel for support at 6356 to start with today, and if that level holds then we may well get rise towards the daily pivot at 6380, with a chance that we see 6422, which is a decent swing short area. This is the 100 Hull moving average on the 2 hour chart which went bearish yesterday. On the 30minute chart there is a fairly wide, descending channel, with support at 6347, and resistance at the 6420 area as well. As such this area is flagging a short too. Looking at the news later I expect the fed will leave rates as is (I still think it will be next year before we see any rises of interest rates). So, to sum up today I think slow to slightly bullish!