Support 6098 6089 6030 5969
Resistance 6130 6137 6144 6171 6189 6200
Good morning. Federal Reserve officials want to raise interest rates in June. Now, it is up to the U.S. economy to confirm their view that slow growth in the first quarter was temporary. Minutes of the April 26-27 Federal Open Market Committee meeting released Wednesday in Washington used the word “June” six times in a policy context. That signal follows several speeches by regional Fed bank presidents warning investors not to dismiss a mid-year hike after the odds of such a move edged close to zero. Meanwhile in the UK, the number of people in work hit a record high in the first quarter, though experts said modest jobs growth and a steady unemployment rate suggested the market could be “cooling off”. Employment rose by 44,000 in the three months to March to 31.58 million, according to the Office for National Statistics (ONS).
Fairly decent day trading yesterday with the 6120 area holding as support till the Fed minutes later on. The bulls didn’t manage to get above the 6170 level, though the divi brought the hunters out a bit earlier for a big jump at 3pm, and then just a slightly smaller one between 4pm and the bell. 6100 held not he Fed news, though a break of that and we will likely be seeing 6000 fairly quickly.
US & Asia Overnight from Bloomberg
Asia’s shares, bonds and currencies fell along with commodities after minutes of the Federal Reserve’s last policy meeting put the prospect of a June interest-rate hike firmly on the table. A gauge of the dollar’s strength held gains following its biggest jump in six months.
The MSCI Asia Pacific Index sank to a six-week low, while U.S. and U.K. stock index futures fell. Singapore’s 10-year bonds dropped by the most since April following this year’s steepest declines in U.S. Treasuries. Currencies in Australia, China and South Korea sank to their weakest levels in more than two months after the Fed record showed most of its rate-setting officials were in favor of boosting borrowing costs next month should the U.S. economy continue to improve. Crude oil fell for a second day as copper sank to its lowest since February. Gold and silver slipped to fresh lows for the month.
The Fed minutes provided a jolt to markets that had until Monday all but ruled out the prospect of U.S. interest rates being raised in June. Fed Funds futures show the odds of such a move surged to 32 percent on Wednesday, after tripling to 12 percent in the prior session as data on inflation, housing starts and industrial production exceeded economists’ forecasts. The shift comes ahead of a meeting of the Group of Seven finance ministers, where Japan is likely to push further fiscal spending as the answer to tepid global economic growth.
“The minutes showed that the policy makers’ desires to raise rates in June exceeded the market’s expectation for action,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co in Tokyo. “The U.S. economy is doing so well that the FOMC can hike rates. But the global economy is on the decline and investors are not sure whether the Fed can really increase interest rates or not.”
An index of leading indicators in the U.S. is due to be released on Thursday, while the U.K. will report on retail sales. Australian figures showed the nation’s unemployment rate held at a 2 1/2 year low, while the Philippines announced first-quarter economic growth that was the fastest since 2013. Fed Vice Chairman Stanley Fischer and New York Fed chief William Dudley are scheduled to speak, while earnings are expected from companies including Wal-Mart Stores Inc., Merck KGaA and Royal Mail Plc.
Stocks
The MSCI Asia Pacific Index declined 1 percent as of 1:35 p.m. Tokyo time, led by slides in raw-material producers and energy stocks. BHP Billiton Ltd., the world’s largest mining company, dropped more than 4 percent. Inpex Corp., Japan’s largest oil and gas explorer, tumbled by the most since February.
Suzuki Motor Corp. rebound 3.9 percent, after sliding 9.4 percent on Wednesday. The company elaborated after markets closed that its improper testing methods wouldn’t result in changes to the fuel-efficiency ratings of its vehicles. Tencent Holdings Ltd. fell the most in two weeks after Asia’s biggest instant message company said uncertainty about China’s economy could cause near-term challenges for its advertising business.
Futures on the S&P 500 declined 0.2 percent, while contracts on the U.K.’s FTSE 100 Index slid 0.7 percent. Monsanto Co., the world’s largest seed maker with a market value of $42 billion, said it received an unsolicited takeover approach from Germany’s Bayer AG.
Currencies
The Bloomberg Dollar Spot Index was little changed, after jumping 0.8 percent on Wednesday to its highest level this quarter. The Japanese yen gained 0.1 percent to 110.06 per dollar, following a 1 percent slide in the last session.
“While the risk of a June hike can no longer be ignored, this isn’t an environment where the market will aggressively price in odds higher than 50 percent,” said Yousuke Hosokawa, head of the currency sales team at Sumitomo Mitsui Trust Bank in Tokyo. “That means it’s hard to buy dollars aggressively above the 110 yen level.”
Australia’s dollar weakened 0.3 percent, while currencies in Indonesia, Malaysia and South Korea dropped by about 0.8 percent. South Africa’s rand fell 0.3 percent, after tumbling 2 percent in the last session. Malaysia, Indonesia and South Africa are set to review monetary policy on Thursday.
Bonds
The yield on Singapore’s 10-year bonds jumped eight basis points to 2.07 percent, while that for Australia’s debt climbed seven basis points to 2.35 percent. Yields on similar-maturity U.S. Treasuries rose two basis points to 1.87 percent, after surging eight basis points in the last session as the Bloomberg US Treasury Bond Index slid 0.7 percent.
The Fed is steering the market into line with its views, said John Gorman, head of U.S. debt trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo.
“They did a very good job,” he said. “I’m still not sure they go in June. In my mind, I’m absolutely positive they go in September.”
Commodities
West Texas Intermediate crude dropped 1.2 percent to $47.63 a barrel, extending Wednesday’s retreat from a seven-month high.
The dollar’s increase coupled with renewed concern over the global oil glut unsettled markets, with U.S. crude inventories unexpectedly rising by 1.3 million barrels last week, according to data issued on Wednesday. Rain in Canada may have also slowed fires that have shifted back toward the province of Alberta’s oil-sands operations.
Copper, nickel and lead fell by about 0.4 percent in London. Gold declined 0.1 percent, after a 1.6 percent slide on Wednesday, and silver was down 0.5 percent. [Bloomberg]
FTSE 100 Outlook and Prediction
For today we might see some selling pressure start to build; the bulls failed to break through 6170 yesterday, though they did a good job of defending the 6100 level. We have dipped below the 10 day Bianca channel and the bottom of that tallies with the daily pivot at 6130 so I feel that a back test of this channel is worth a short to target sub 6100 today. There are a few resistance levels at 6140ish, so the bulls will be keen to break this level, and if they do then 6190 is a possibility. However, the ruling trend for the short term is down so I still feel that shorting the rallies is the best play at the moment, to target 6030 or lower. We have a red coral on the daily chart now with resistance at 6280 so am keeping half an eye on that level if the bulls were to put on a charge. After what turned out to be quite big news from the fed with the possible rate rise next month (though only 32% chance at the moment) we might have a bit of a funny day as that is digested and various “models” tweaked.