Good morning. Bit frustrating with the FTSE yesterday getting stopped out of the short to then watch it fall from the 6210 level. I mentioned 6210 and 6232 as the resistance levels in the follow up email – should have SMS’d a short at 6210 after all! isn’t hindsight wonderful! Anyway, the S&P short saved the day instead netting a decent amount of points with the run down (that kept going past the 2050 support area as well). That said, despite the FTSE falling yesterday its held up pretty well considering the bearishness around, and is still at 6150 as I write this. We have a 17 point divi today so should see some buyers come in before the bell around 4pm.
US & Asia Overnight from Bloomberg
Asian stocks fell for the first time in three days and the dollar strengthened against all of its major peers on prospects for a U.S. interest-rate hike. Japanese shares and the yen fluctuated as investors weighed whether better-than-expected economic growth reduces the need for stimulus.
All 10 industry groups retreated on the MSCI Asia Pacific Index, which lost ground on all but three days over the last three weeks. The yen traded near this month’s low. A gauge of the greenback’s strength climbed to the highest since March as South Africa’s rand and South Korea’s won dropped by at least 0.7 percent. Crude oil traded above $48 a barrel before data that’s forecast to show a drop in American stockpiles, while copper and gold fell for the first time in four days.
Global equities have struggled to extend gains since reaching this year’s high on April 20 as investors scrutinize U.S. data for clues on the timing of the Federal Reserve’s next interest-rate increase. Odds of a June hike tripled to 12 percent on Tuesday, Fed Funds futures show, as central bank officials commented on prospects for borrowing costs to be raised and U.S. data showed quickening inflation and a pickup in new-home construction. The authority will release the minutes of its April policy meeting on Wednesday.
“Fed officials have come out all sounding hawkish,” said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “That tone is likely to continue.”
Japan’s economy grew an annualized 1.7 percent last quarter, beating estimates for 0.3 percent growth, and averting a recession. The figures support the Bank of Japan’s surprise decision at its last meeting to forgo additional monetary stimulus. The focus now shifts to whether Prime Minister Shinzo Abe will push ahead with a planned sales-tax increase. The nation’s shares were boosted on Monday by a Nikkei newspaper report over the weekend that the government was planning to delay the tax hike.
Euro-area inflation data are also due Wednesday, while companies reporting earnings include Cisco Systems Inc., SABMiller Plc and Tencent Holdings Ltd. Finance ministers and central bank governors from the Group of Seven countries will meet April 20-21 near Sendai, Japan, to discuss currency tensions, the limits of monetary policy, and the need for more fiscal spending.
Stocks
The MSCI Asia Pacific Index lost 0.8 percent as of 1:45 p.m. Tokyo time. Futures on the S&P 500 declined 0.1 percent, following a 0.9 percent decline in the U.S. benchmark on Tuesday, and contracts on the U.K.’s FTSE 100 Index were down 0.3 percent.
Benchmarks in Seoul and Shanghai sank to two-month lows, as did a gauge of Chinese shares listed in Hong Kong. Japan’s Topix index was little changed, after swinging from a 0.6 percent loss to a 1 percent gain.
The GDP report “makes it harder to delay the sales tax,” said Seiichiro Iwamoto, a senior fund manager at Mizuho Asset Management Co. in Tokyo. “The market’s core stance right now is that they should not raise it. We’ll be watching very closely what the government says next.”
Suzuki Motor Corp. plunged as much as 15 percent in Tokyo after saying it used an improper method to test the fuel efficiency of its vehicles.
Currencies
The Bloomberg Dollar Spot Index advanced 0.2 percent. Atlanta Fed President Dennis Lockhart and San Francisco’s John Williams said Tuesday two interest-rate rises may be warranted this year, while Dallas Fed President Robert Kaplan said a move could come soon. Australia’s dollar lost 0.6 percent, while the won dropped 0.7 percent and the rand slid 0.8 percent.
“The recent Fed comments and data point to a U.S. rate hike and this has strengthened the preference for safer assets,” said Suh Dae Il, an analyst at Daewoo Securities Co. in Seoul.
The yen was little changed at 109.15 per dollar, after sinking Tuesday to this month’s low of 109.65.
Commodities
West Texas Intermediate crude rose as much as 0.6 percent to $48.58 a barrel, extending gains at a seven-month high. Analysts foresee a 3.5 million-barrel drop in U.S. inventories for last week, which would cap the first two-week decrease since September, according to a Bloomberg survey before Energy Information Administration data due Wednesday.
Copper, nickel and zinc dropped by almost 1 percent in London. Gold declined 0.3 percent, while silver and platinum retreated 0.6 percent.
“If news of a Fed hike is in the FOMC minutes, this might be negative for gold,” said Brian Lan, managing director of Singapore-based GoldSilver Central Pte. “Gold does not pay interest or provide dividends, and in a higher interest-rate environment, the cost of holding precious metals would be higher.”
Bonds
U.S. Treasuries due in a decade were little changed, yielding 1.77 percent. That compares with a one-month low of 1.70 percent at the end of last week. Similar-maturity debt in Singapore declined by the most in three weeks, lifting the yield by four basis points to 2 percent.
Jan Hatzius, the chief economist at Goldman Sachs Group Inc., warned bond investors aren’t prepared for the Fed to raise interest rates despite officials having flagged the possibility of such a move.
“The market’s underestimating their willingness to follow through on what they say,” Hatzius said Tuesday in an interview on Bloomberg Television. “If you look at where the yield curve is priced — how little normalization of monetary policy is discounted — that’s very striking.” [Bloomberg]
FTSE 100 Outlook and Prediction
For today the main thing is the 17 point divi which is quite a decent size so will more than likely see the divi hunters appear around 4pm to move the price higher towards the close. Worth going long for this. To start with we have resistance at the 6165 area where we have the daily pivot and also a red coral on the 30min. The 2 hour chart has also turned bearish after that fall yesterday, with resistance at the 6145 level, though it does have green coral support at 6133 – mixed picture on this. The bears will probably try and build on their assault from 6210 yesterday, though they will try to break 6125 to target 6060 again. The bulls however, will be trying to make 6145 hold as support as we have the 30min 200ema here. Battle stations! The 25ema on the daily, whilst breached yesterday is showing 6185 as resistance – that spike up to 6210 yesterday was a bit suspicious and just looked like a bit of a stop hunt really, as the resistance was 6190. So, for today I’m thinking small rise dip then rise towards the bell, probably from the bottom of the 10 day Bianca at 6125.