Support 6224 6217 6211 6198 6150 6146
Resistance 6266 6303 6316 6321 6357
Good morning I hope you had a good weekend. Well the NFP on Friday managed to throw the cat amongst the pigeons as per usual with a rather poor 38k figure, which immediate saw markets tumble. However, as is often the way the initial reaction was short lived and the FTSE (and others) rallied back, from the 6170 low to end the week around the 6240 area. Its actually stayed around there overnight as well, even though the latest polls are still showing the leave camp in the lead with the Brexit vote. The rally was of course due to the expectation that the Fed now won’t raise rates in July, despite overtures recently that June or July would see a rate hike. As expected Friday was choppy, though the dip down to the 100 Hull MA on the 2 hour (despite overshooting) didn’t give the best entry, the rally back means the 2 hour chart is still bullish for the time being.
US & Asia Overnight from Bloomberg
- Odds of a Fed rate hike by July halved after U.S. jobs data
- Sterling slides after new polls show Brexit support growing
Stocks in Asia excluding Japan rallied with oil and industrial metals after U.S. jobs data crushed speculation the Federal Reserve will raise interest rates by July. The pound slumped and U.K. equity index futures gained following polls that showed Britons favor exiting the European Union.
The MSCI Asia Pacific excluding Japan Index climbed to a one-month high. The Bloomberg Commodity Index advanced to levels last seen in October as crude traded near $49 a barrel and zinc rose for an eighth day. Malaysia’s ringgit and Indonesia’s rupiah were the best performers among 31 major currencies, after the Bloomberg Dollar Spot Index tumbled on Friday by the most since February, and the pound sank to a three-week low. Sovereign debt gained across most of Asia, extending a global rally that’s driven yields to a record low.
The U.S. economy created the fewest jobs last month in almost six years, data showed Friday, and the odds of the Fed raising interest rates by July halved to 27 percent in the futures market. While reduced prospects of a rate hike are giving a lift to dollar-denominated commodities and assets in developing nations, gains are tentative ahead of the U.K.’s June 23 referendum on EU membership. Institutions including the International Monetary Fund have warned of dire fallout if Britain votes to exit.
“I don’t want to sound scary, but the market isn’t prepared for” so-called Brexit, said Nader Naeimi at AMP Capital Investors Ltd. in Sydney, a company that oversees more than $110 billion. He’s been buying futures contracts on European and U.S. equity volatility, even as he forecasts voters will choose to stay in the EU. “It makes sense to buy some protection. Fear, worry and volatility are likely to intensify as we get closer,” he said.
Fed Chair Janet Yellen may give investors some clues to her thinking about the economy when she speaks Monday in Philadelphia ahead of the central bank’s mid-month policy review. Boston Fed chief Eric Rosengren will talk earlier in Helsinki and U.S. officials including Treasury Secretary Jacob Lew are in Beijing for a two-day bilateral economic summit with Chinese counterparts. A gauge of retail activity in the euro area is scheduled for release, while Germany will report on April factory orders. Financial markets in New Zealand, Sweden and South Korea are closed for holidays.
Stocks
The MSCI Asia Pacific excluding Japan Index climbed 0.7 percent as of 1:55 p.m. Tokyo time, led by raw-materials producers. Newcrest Mining Ltd., Australia’s largest gold producer, jumped 13 percent in Sydney and BHP Billiton Ltd. surged more than 4 percent.
The Topix fell as much as 1.9 percent, before recouping more than half of its loss as the yen retreated from a one-month high.
Futures on the U.K.’s FTSE 100 Index added 0.6 percent, while S&P 500 contracts were little changed.
Commodities
West Texas Intermediate crude added 1 percent to $49.11 a barrel, after falling 1.4 percent last week as OPEC refrained from freezing output at a meeting in Vienna. The global oil surplus is shrinking faster than expected and has the potential to send prices as high as $60 a barrel this year, according to Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development.
Zinc climbed as much as 1.6 percent in London to its highest level since July 2015, buoyed by speculation that mine supply cuts will lead to a worsening deficit. Nickel and tin gained more than 1 percent and copper rose 0.8 percent.
Iron-ore futures in Dalian climbed 5.2 percent after the first decline in Chinese port inventories in three weeks. Stockpiles fell 0.4 percent last week to 100.25 million metric tons, according to data compiled by Shanghai Steelhome Information Technology Co.
Currencies
The pound dropped as much as 1.1 percent versus the dollar after an ITV opinion poll found 45 percent of Britons backed the ‘Leave’ campaign, compared with the 41 percent who were for ‘Remain.’ The numbers were 43 percent for ‘Leave’ and 41 percent for ‘Remain’ in a TNS survey.
“If there’s any one other currency investors may want to go short on besides paring long dollar positions that would be sterling,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “There’s a binary event risk of much greater proportions than just a policy move. Sterling very much remains on the backfoot.”
The Bloomberg Dollar Spot Index was up 0.3 percent, after tumbling 1.5 percent in the last session following the U.S. jobs report. Payrolls climbed by 38,000 in May, less than the most pessimistic estimate in a Bloomberg survey.
The yen weakened 0.5 percent versus the greenback, after a 2.2 percent surge on Friday that marked its biggest gain since April. The Australian and New Zealand dollars were down 0.5 percent and 0.6 percent, respectively, after surging by about 2 percent on Friday. The ringgit strengthened 1.1 percent, its biggest gain since March, and the rupiah rose 1.2 percent. The U.S. employment data came out after most Asian markets had closed last week.China’s yuan fell to its lowest level against a basket of peers since November 2014 after the central bank strengthened the fixing by less than expected following a slump in the dollar. The currency was 0.2 percent weaker versus the dollar in Shanghai, after jumping 0.7 percent on Friday. The People’s Bank of China strengthened its reference rate by 0.5 percent.
“It seems to me that the Chinese authorities still have a weakening bias in the currency,” said Zhou Hao, a Singapore-based economist at Commerzbank AG, who had predicted the fixing would be 1 percent stronger.
Bonds
Government bonds rose in Asia, extending a rally that drove global yields to a record low at the end of last week.
The yield on the Bloomberg Global Developed Sovereign Bond Index dropped to 0.62 percent on Friday, the least in data going back to 2010. Australia’s 10-year yield fell to an all-time low of 2.16 percent. Japan’s slid to negative 0.12 percent, approaching the record minus 0.135 percent. Treasuries were little changed Monday after yields slid the most in four months on Friday. [Bloomberg]
FTSE 100 Outlook and Prediction
For today the charts certainly look bullish to start with so we may well get a rise up towards R1 and the top of the declining 30min channel at 6266 area. However, the last time a poll showed the leave camp in the lead the market dropped. Not that polls actually mean anything anyway. We have had an overnight dip down to the pivot at 6216 already, however, if we see a test of that pivot in hour I think a long here is worth a go. We have often had bullish Monday’s over the past few months, followed by bearish Tuesdays and certainly looking at the moving averages I think that this morning could be positive, with the bulls keen to build on Friday bounce back. The 2 hour chart is still bullish and we may well get a green coral this morning at 6212’ish if the bulls can hold onto their gains. 6198 is the Hull 100 MA support again, same as Friday. So, generally today I am favouring buy the dip, and I am watching the 6315 area for more major resistance as we have the top of the 2 Bianca channels here. Speaking of which, the support from both are around the 6150 area as well, so that worth a watch too!