Support 6258 6255 6245 6230 6208 6176
Resistance 6281 6284 6305 6313 6316 6359
Good morning. I hope you had a good long weekend. The FTSE 100 futures managed to hit the 6295 level yesterday which was the resistance level from Friday, and we have dropped back a bit since then. Gold hit 1200 (after a 6% drop from the 1300 level a little over a week ago) and has bounced a little bit since. Having dropped to 6250 from the 6295 the FTSE 100 has bounced a bit also and currently at 6270 as I write this. The bulls will be keen to break 6284 initially this morning for a push above 6300 this week. With the S&P popping above 2100 the omens are on the side of the bulls at the moment.
US & Asia Overnight from Bloomberg
- Gold halts selloff; oil heads for 4th straight monthly gain
- Aussie dollar surges as strong exports set to bolster GDP data
Asian stocks extended gains, trimming their worst month since February amid optimism the global economy is strong enough to withstand a boost to U.S. borrowing costs that may come as early as June. The dollar retreated versus major peers, paring its best rally since 2014.
Gains in Japan and Hong Kong pushed the regional equity benchmark up for a fifth straight day. China’s equities shrugged off a flash-crash in index futures with the Shanghai index heading for its biggest gain since March. Currencies from Australia to South Africa and Britain chipped away at the dollar. Gold climbed for the first time in 10 days, halting its longest slump in more than a year, as Treasuries dropped on their first day of trading this week. American crude oil headed for its longest run of monthly gains in five years amid output disruptions.
The Fed’s rate outlook continues to occupy markets as traders maintain odds of a hike in July at more than 50 percent. With U.S. officials emphasizing that any policy tightening is dependent on the economy continuing to improve, investors will be scrutinizing American payrolls and personal income data due this week. The potential for higher U.S. yields has revived the greenback in May, with a gauge of the currency versus major peers up more than 3 percent this month. Meanwhile, data is painting a lackluster picture of Japan’s economy, with bets leaders will have to boost stimulus weakening the yen.
“In either June or July, they’re going to” raise U.S. interest rates, said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan Inc. in Tokyo. “The economy is not in a bad condition.”
Data on personal spending and income greet investors in the U.S. returning from Monday’s Memorial Day holiday, with the jobs report due on Friday. Markets in the U.K. also resume Tuesday after a break. Singapore and Indonesia will update on money supply, Thailand reports on trade and Hong Kong posts on retail sales. Later in the session, India will report on first-quarter gross domestic product.
“While keeping an eye on U.S. monetary policy, market participants will also be looking at which way the market could go next,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo. “Investors want to see how U.S. markets react after their holiday.”
Stocks
The MSCI Asia Pacific Index climbed 0.6 percent as of 1:13 p.m. Tokyo time. The measure is still down 1.7 percent in May, its worst monthly drop since February. In January it tumbled 8 percent amid global anxiety over China.
Japan’s Topix index gained 0.8 percent after fluctuating at the start of the session, on track for a 2.7 percent advance in May, while energy and consumer companies led Australia’s S&P/ASX 200 Index down 0.2 percent, trimming its third straight monthly climb to 2.8 percent. The Kospi index in Seoul rose 0.6 percent.
The Shanghai Composite Index jumped 2.4 percent, set for the steepest climb since March 30. Contracts on the CSI 300 Index dropped as much as 10 percent at around 10:42 a.m. local time, recovering almost all of the losses in the same minute. The move had little effect on the underlying CSI 300, which rose 2.6 percent at the midday break.
In Hong Kong, the Hang Seng and Hang Seng China Enterprises indexes rose more than 1 percent. Singapore’s Straits Times Index advanced 1 percent.
Index operator MSCI Inc. will start including American Depository Receipts of Chinese shares in its stock gauges as of Tuesday’s close, giving passive investors bigger stakes in China’s technology and services companies, while downsizing state-run industrial and financial equities. MSCI will decide in June whether to include mainland-traded A shares as well.
Futures on the S&P 500 Index were up 0.2 percent from Friday’s close, to 2,102.25. Comments from Fed Chair Janet Yellen on Friday supporting the case for a rate increase in the next few months sent the U.S. benchmark up 0.4 percent.
Currencies
The yen weakened 0.2 percent to 111.29 per dollar, even as most major currencies rallied. Australia’s dollar climbed 0.8 percent. South Africa’s rand rose 0.5 percent and the pound strengthened 0.4 percent.
After rallying over the past two sessions the dollar took a breather, with the Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, down 0.1 percent. The index is still up 3.5 percent in May, after retreating over the previous three months.
Bets on the Fed increasing rates at next month’s meeting have jumped to 30 percent, from 12 percent a month ago, while odds of a move in July are at 54 percent, up from 26 percent, according to Fed funds futures tracked by Bloomberg. Fed officials including Chair Janet Yellen have flagged the possibility of a rate increase as soon as June over the past two weeks.
“U.S. policy normalization and its likely impact has remained a key theme for markets,” Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a note to clients. “The dilemma facing the data-dependent Fed is that some U.S. data does not look as strong as it once did, with the manufacturing sector under the pump. At some stage the Fed will choose which course of action it will take, and trust that the economy – and financial markets – are resilient enough to bear it.”
Bonds
Treasuries declined, sending the yield on benchmark 10-year notes up by one basis point to 1.86 percent.
Australian government securities retreated, reversing initial gains, after the statistics bureau said net exports contributed 1.1 percentage points to gross domestic product, more than the 0.7 point increase forecast in a Bloomberg survey of economists. The yield on 10-year bonds rose two basis points to 2.30 percent in Sydney, after earlier declining two basis points.
Japanese two-year debt advanced after a sale of the securities drew the strongest demand since December 2014. The yield on the bonds declined 0.5 basis point to minus 0.245 percent. Yields on 10-year Japanese notes were unchanged at minus 0.115 percent.
Commodities
Gold for immediate delivery jumped 0.6 percent to $1,212.06 an ounce, after sliding almost 6 percent over the previous nine days as the prospect of a U.S. rate hike diminished the precious metal’s appeal.
Copper declined at least 0.4 percent with lead as the London Metals Exchange started trading for the week, while nickel surged 0.7 percent.
West Texas Intermediate crude was up 0.4 percent from Friday’s close in the U.S., to $49.53 a barrel, as traders await Thursday’s meeting of OPEC suppliers. WTI has climbed 7.8 percent in May, its fourth straight monthly advance and the longest stretch of gains since 2011.
Militant attacks have cut Nigerian oil supply to the lowest level in more than two decades while Canadian output is still stabilizing after sliding amid wildfires. Libya’s Petroleum Facilities Guard captured a town near the Es Sider and Ras Lanuf oil-loading terminals after fierce clashes with Islamic State militants. [Bloomberg]
FTSE 100 Outlook and Prediction
The bulls are still firmly in charge despite the drop form 6295 to 6250 on Monday on the futures prices. We have a pretty decent rising channel on the 30min chart, and if the bulls can break 6282 area initially then they should be good for a retest of the 6295, and more than likely the 6305 resistance area. This area looks fairly key for the bulls to break and we also have the top of the 20 day Bianca at 6313. Gold has bounced a bit, there is still uncertainty over when the US will actually raise rates again and we have Brexit coming up next month all for a few headwinds. However, buying the dip has been favourable for the past few sessions, and the daily chart is now bullish again, with support at 6230 and 6208. The 2 hour chart has resistance at 6305 though, hence the short around here, so the bulls will be keen to break this level today. I am thinking a dip and rise today with the 200ema on the 30min holding as support, at the 6255 level.