Support 6133 6130 6119 6064
Resistance 6187 6202 6217 6228 6259
Good morning I hope you had a good weekend. Fairly quiet not he financial news front over the weekend though the EU stay/leave is taking up more and more airtime now. Since the 6050 low last week the bulls have managed to fight back and we are sitting just above 6150 as I write this, however with the 20 day Bianca channel showing resistance at 6187 and the top of the 20 day Raff at 6200 it remains to be seen how much upside is left in this bounce.
US & Asia Overnight from Bloomberg
- Oil declines for a fourth day as iron-ore prices slump
- Japanese shares drop as exports slide; Taiwan equities jump
The dollar retreated against all of its major counterparts as traders weighed the likelihood that the Federal Reserve will raise interest rates next month. Yen gains weighed on Japanese shares, while emerging-market stocks extended Friday’s rebound from a two-month low.
A gauge of the greenback’s strength declined following a run of three weekly gains. The yen rose from near this month’s low, spurred by the biggest trade surplus in six years and a U.S. rebuttal of Japan’s case for intervention to weaken the exchange rate. The Topix index retreated from this month’s high in Tokyo, while Taiwan’s Taiex jumped by the most since September. Oil fell for a fourth day after Iran said it won’t countenance freezing output until its production is back at pre-sanctions levels. Iron ore tumbled.
While the minutes of the Fed’s April policy meeting jolted markets last week by signaling a June rate hike is possible, China’s uneven growth picture and the U.K.’s June referendum on European Union membership are reasons for the central bank to exercise some restraint when it comes to tightening. Regional Fed chiefs for St. Louis, San Francisco and Philadelphia are due to speak Monday and their comments may shed light on prospects for borrowing costs to be raised next month. The odds of such a move jumped seven-fold to 28 percent over the last five trading days, Fed Funds futures show.
“The risk for Federal Reserves to raise its rate in June is still there,” said John Teja, a director at PT Ciptadana Securities in Jakarta. “I would recommend investors to stay defensive although they can start buying good quality companies that have been depressed in the recent sell-off.”
Preliminary assessments of manufacturing this month in the U.S. and the euro area are due Monday, while a reading for Japan showed a deterioration. Taiwan has data on industrial output coming, while Singapore and Hong Kong release figures on consumer prices. Financial markets in Canada are closed for a holiday.
Currencies
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, dropped 0.2 percent as of 1:27 p.m. in Tokyo, after rallying 0.8 percent last week.
The euro gained 0.1 percent, advancing for a second day. Candidates for Austria’s anti-immigration Freedom Party and a nominee backed by the Green Party were tied following a run-off vote in the European country’s presidential election. Greek lawmakers on Sunday approved additional austerity measures required to unlock more emergency loans from the euro area, ahead of a meeting of finance ministers that will assess the country’s compliance with its bailout program and determine the scope for debt relief.
The yen climbed 0.3 percent to 109.83 per dollar, after losing ground in each of the last three weeks as Japanese officials warned they may intervene to weaken the currency, which has strengthened about 10 percent this year. Finance Minister Taro Aso raised the issue in a meeting with U.S. Treasury Secretary Jacob J. Lew, who said yen moves haven’t been overly volatile. The two were attending a meeting of Group of Seven finance chiefs in Japan.
South Korea’s won strengthened 0.7 percent versus the greenback, while the Australian dollar appreciated 0.4 percent.
Stocks
The MSCI Emerging Markets Index rose 0.9 percent after gaining 0.4 percent on Friday. Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry Co., which count Apple Inc. as their biggest customer by revenue, were the biggest contributors to the rally after Economic Daily News reported that the iPhone maker has asked suppliers to prepare production for a new version of its smartphones. Taiwan’s Taiex surged 2.7 percent, headed for its highest close of the month.
The Topix lost 1 percent as Japan reported a seventh straight drop in monthly exports. Chinese stocks rose in Shanghai and Hong Kong, with volatility in mainland equities plunging to 15-month lows.
Futures on the S&P 500 gained 0.1 percent after the benchmark advanced 0.6 percent on Friday, while contracts on the U.K.’s FTSE 100 Index added 0.2 percent.
Fed Bank of Boston President Eric Rosengren told the Financial Times at the weekend that he’s ready to back a rate increase. St Louis Fed President James Bullard speaks in Beijing Monday, while John Williams of the San Francisco Fed is due to give an address in New York. Philadelphia Fed chief Patrick Harker delivers two speeches this week, while Fed Chair Janet Yellen will speak at Harvard University on Friday.
“Market repricing of Fed tightening risk was the big driver last week, and that could carry over into this week,” Win Thin, head of emerging markets at Brown Brothers Harriman & Co. in New York, said in an e-mail to clients. “There are several Fed speakers in the days ahead, capped off with Fed chief Yellen on Friday.”
Commodities
Crude oil for delivery in July fell as much as 0.7 percent to $48.09 a barrel in New York. Exports from Iran could surpass 2.2 million barrels a day by mid-summer, the head of National Iranian Oil Co. said, according to the Mehr news agency.
Oil has surged more than 80 percent from a 12-year low earlier this year on signs the global surplus will ease as U.S. output declines. The Organization of Petroleum Exporting Countries is unlikely to set a production target when the group meets June 2 as it sticks with Saudi Arabia’s strategy to squeeze out rivals, according to all but one of 27 analysts surveyed by Bloomberg.
Iron ore slumped, with futures on the Dalian Commodity Exchange sliding as much as 6.1 percent to a three-month low. Inventories at China’s ports have climbed above 100 million tons, offering fresh evidence of increased supplies in the world’s top user that may hurt prices. The port holdings may continue to rise, BHP Billiton Ltd. forecast last week.
Bonds
Benchmark U.S. Treasuries were little changed, with the 10-year yield at 1.84 percent. A rally that sent global bond yields to a record has come to an end as investors prepare for the Fed to raise interest rates.
“The Fed is ready to increase the policy rate,” said Yoshiyuki Suzuki, the head of fixed income in Tokyo at Fukoku Mutual Life Insurance Co., which has $59.4 billion in assets. “I think they will move in June or July. Treasury yields should go up.” [Bloomberg]
FTSE 100 Outlook and Prediction
I am watching two main areas today, 6187 for resistance and 6120 for support and it will be interesting to see what happens at these areas. As mentioned above we have had a good bounce form the 6050 recent low last week, however we are getting near to the top of the daily channels again, and also the “Brexit” EU vote is getting closer, which will likely start to limit too many massive trades. I was reading that its already tempered the housing market a bit as everyone waits to see the result. The 6120 support is off the 2 hour chart as we have the 100 Hull moving average here and also the coral line, and we also have the 30min 200ema and daily pivot at 6130. The 6187 is the top of the 20 day Bianca channel, whilst the 10 day Bianca and Raff are both at 6202. Therefore shorts around this area are worth a go. The daily chart is still bearish, with us nearly at the 25ema again at 6173, so a fair few resistance levels not too far away. If the bears break the 6120 support area today then we are likely going to revisit the 6050 level, and probably 6000 as well this week.