FTSE 100 Support 6995 6973 6957 6940 6939 6912
FTSE 100 Resistance 7043 7055 7072
Good morning. Was a bit more bullish than I expected yesterday managing to rise to 7030 off the back of the increased inflation news… sterling strengthened a bit as well, back up to the 123 area against the dollar for the moment. Higher prices for clothing, particularly womenswear, hotel stays, restaurants, petrol and gas pushed the UK consumer price index up to 1pc in the year to September, compared with a 0.6pc rise in the year to August. The inflation figure is higher than the 0.9pc rise widely expected by the City and is the highest rate of growth since November 2014.
The FTSE 100 did fall back from the 7030 area though the bulls managed to hold that 7000 area overnight, even with the China news showing a slowdown in industrial output. We have the 10 day Bianca channel for initial resistance at 7055 – these channels seem to be working again so a tentative short here for a run down to 6975 or lower looks worth a go.
US & Asia Overnight from Bloomberg
A touch of caution was evident in financial markets after a slew of Chinese data that largely painted a picture of stabilization in the world’s second-biggest economy.
The MSCI Asia Pacific Index and the Australian dollar trimmed gains as an unexpected slowdown in China’s industrial output cast a cloud over gross domestic product figures that matched estimates. Hong Kong’s Hang Seng Index swung to a loss and the Shanghai Composite Index surrendered the bulk of its advance. A gauge of the greenback’s strength held near its lowest level in more than a week following U.S. inflation data that damped expectations for interest-rate hikes. Oil rose after data showed American supplies fell.
A stabilizing Chinese economy has helped bolster investor sentiment since January, when a tumbling yuan and signs of a slowdown spurred selloffs in global equities and commodities. While Wednesday’s data was nothing to shout about, it provides some reassurance as the Federal Reserve weighs the case for its first interest-rate hike since December. The probability of borrowing costs being increased this year slipped by three percentage points to 63 percent on Tuesday as core U.S. inflation fell short of estimates.
“China won’t do anything new in terms of policy because the economy isn’t sliding,” said Ben Kwong, a Hong Kong-based director at KGI Asia Ltd. “Under these conditions, the market doesn’t really have a direction. It needs to wait for news on U.S. rates.”
Stocks
The MSCI Asia Pacific Index added 0.3 percent as of 12:38 p.m. Tokyo time, having been up 0.4 percent prior to the China data. The Hang Seng Index declined 0.2 percent and a gauge of Chinese companies’ Hong Kong-listed shares fell 0.4 percent. The Shanghai Composite was up 0.1 percent.
Sharp Corp. surged as much as 11 percent in Tokyo after Nikkei reported that the company expects to achieve an annual operating profit for the first time in three years. Betting company Tatts Group Ltd. jumped 16 percent in Sydney after agreeing to be bought by Tabcorp Holdings Ltd. in a deal valued at A$6.4 billion ($4.9 billion). Tabcorp rose 2 percent.
Futures on the S&P 500 Index added 0.1 percent after the U.S. benchmark climbed 0.6 percent from a one-month low in the last session. Goldman Sachs Group Inc. gained 2.2 percent on Tuesday after posting a 47 percent increase in earnings, while Netflix Inc. surged 19 percent after reporting a jump in subscribers. While only 57 S&P 500 members have reported results so far, 83 percent announced earnings that exceeded analysts’ estimates, according to data compiled by Bloomberg.
Currencies
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, declined less than 0.1 percent. The gauge has advanced this month amid speculation the Fed was getting closer to a rate hike, prompting hedge funds and money managers to boost net bullish bets.
Australia’s dollar was up 0.1 percent, after earlier strengthening as much as 0.3 percent. New Zealand’s currency was up 0.3 percent, having recorded a gain of 0.6 percent in the run-up to the Chinese data. Both countries count China as their biggest export market.
“If the Aussie and Kiwi are looking for fresh fuel, they didn’t find it in the China data,” said Sean Callow, a senior strategist at Westpac Banking Corp. in Sydney.
Bonds
Australia’s 10-year bonds gained for the first time in four days, pushing their yield three basis points lower to 2.31 percent. The rate on similar-maturity U.S. Treasuries was little changed at 1.74 percent, having fallen three basis points on Tuesday as core inflation, which excludes energy and food costs, came in weaker than economists estimated.
Commodities
West Texas Intermediate crude climbed 1 percent to $50.78 a barrel in New York. U.S. oil stockpiles dropped by 3.8 million barrels last week, the American Petroleum Institute was said to have reported. Analysts surveyed by Bloomberg forecast official data on Wednesday would show an increase in supplies. Oil has risen about 14 percent since OPEC reached a deal to manage supply last month.
Gold added 0.1 percent, gaining for a third day. Aluminum rose 0.2 percent in London, while copper was down 0.1 percent. [Bloomberg]
FTSE 100 Outlook and Prediction
I am still in a short the rallies frame of mind, with 7055 looking a good level to enter, if the FTSE 100 was to to get that high. We have the 10 day Bianca channel here, though the 10 day Raff channel is just above at 7070. For the bulls, we have support on a bullish 2 hour chart now at 6973, so this area looks worth a long, though if broken then I am expecting a trip to 6900 and maybe lower. We have tested the supports a few times now and bounced back well (from 6930 the other day) which is showing that the bears have power to drive it lower, whilst the bulls are desperate to keep it above 7000. As with the last few weeks a lot will depend on sterling also.
So, fairly simple plan today, looking at 7055 for resistance and 6973 for support. FTSE divi is 8.7 as well, so might well see some buyers come in during the last 30min of the day at 16:00.