Support 6190 6185 6173 6155 6107 6093
Resistance 6201 6231 6243 6250 6253 6275
Good morning. Bit of an interesting one yesterday with that sharp rally from just above the 6160 support level where we had the long order (sods law again), up to 6230 before once again dropping back to 6200 and spending most of the time around there. As I said yesterday it’s not sure if it should be rising or falling. Earnings season in the US hasn’t started that well with Alcoa starting things off with a 92% fall in Q1 revenue and cutting forecasts as demand for commodities slows further. Gold has dropped back from the 1260 peak overnight, but there is still some bull life in the FTSE – 6225 is the level to beat still.
US & Asia Overnight from Bloomberg
- Oil holds above $40 as gold slips from three-week high
- Nomura shares jump on plan to shut European equity operations
Japan drove gains in Asian shares as the yen snapped its longest rally since 2012, providing respite for the nation’s exporters. Australia’s currency strengthened and its bonds fell after a report showed business confidence is improving.
The Topix index climbed the most in three weeks as the yen weakened against all 31 major peers, weighed down by the risk of intervention. Nomura Holdings Inc. jumped the most in two months on a reported plan to shut its European equity operations. A Japanese exchange-traded fund tracking Brazilian stocks gained after lawmakers in the Latin American country pushed the president closer to being impeached. Australia’s 10-year bonds dropped the most in a month and Japan’s 30-year yield slid to a record. Crude oil held above $40 a barrel, while gold retreated from a three-week high.
A rebound in global equities has stalled this month as investors turn their attention to the first-quarter earnings season, which kicked off Monday with Alcoa Inc. — the biggest U.S. aluminum producer — reporting a 92 percent slide in net income and lowering its forecast for global demand. Analysts are projecting profits for companies in the Standard & Poor’s 500 Index will contract 10 percent, compared with calls for flat earnings growth at the start of the year. Oil is also in focus before major producers meet this weekend to discuss an output freeze.
“It seems investors have become weary of that selling and are starting to see that the timing for buying back those shares has come,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities, of shares that had been oversold. “We’re seeing a global unwinding of risk-off moves.”
The International Monetary Fund on Tuesday will release its updated World Economic Outlook, which is likely to show a dip in the global growth forecast following a reduction in the previous projections in January. Managing Director Christine Lagarde said last week that expansion “remains too slow, too fragile, and risks to its durability are increasing.”
A National Australia Bank Ltd. gauge of the nation’s business sentiment doubled last month and a measure of employment climbed to the highest in almost five years, a report showed Tuesday. Japan will release machine-tool orders data for March, while inflation figures are due from European countries including Germany, Sweden and the U.K.
Stocks
The MSCI Asia Pacific Index climbed 0.7 percent as of 2 p.m. Tokyo time, rising for a fifth day, its longest run of gains in six months. The Topix advanced 1.5 percent, led by carmakers and banks. Benchmarks in Australia, Indonesia and South Korea rose at least 0.5 percent, while the Shanghai Composite Index fell 0.7 percent.
Nomura surged 8.4 percent after a Bloomberg report said Japan’s largest brokerage plans to shut down its European equities business and cut jobs in the Americas. The Tokyo-listed Next Funds Ibovespa Linked ETF surged 4.1 percent, rising for a second day. A committee of Brazilian lawmakers voted to recommend the impeachment of President Dilma Rousseff on allegations she bypassed Congress to illegally finance a budget deficit.
Futures on the Standard & Poor’s 500 Index added 0.1 percent, while contracts on the U.K.’s FTSE 100 Index declined 0.2 percent.
“The market lacks enough conviction to move stocks in any one direction for any one amount of time long enough for investors to sink their teeth into and rack up performance,” said John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York. “There is an increased amount of skepticism and concern, mostly around earnings season. It boils down to a market that has to climb a wall of worry and has to earn its gains.”
Company earnings are declining in 29 of the largest 30 global markets, with the exception being Switzerland, Jonathan Garner, chief Asia and emerging-market equity strategist at Morgan Stanley in Hong Kong, said in a research note dated April 10. The New York-based bank puts the chance of a global recession at 30 percent, according to the note.
Currencies
Japan’s currency weakened for the first time in eight days, slipping 0.3 percent to 108.22 per dollar. It reached 107.63 on Monday, the strongest level since October 2014. Japan will take“proper action” if foreign-exchange moves are extreme, Finance Minister Taro Aso said Tuesday, before a meeting of central bankers and finance ministers from the Group of 20 this week.
“The market is quite cautious about going too aggressively long on the yen,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “The intervention risks are stepping up dramatically.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after dropping to its lowest close since June. Large speculators cut net bullish positions on the greenback to the lowest in almost two years last week, Commodity Futures Trading Commission data show.
Australia’s dollar rose 0.5 percent versus the greenback, the best performance among major currencies. One-month non-deliverable forwards on Brazil’s real ticked up 0.1 percent after strengthening by about 2.8 percent in each of the last two trading sessions. The real is trading at its strongest level since August after gaining the most among global currencies in the first quarter.
“Markets are closely monitoring the impeachment story as this week could be a turning point in redefining Brazil’s political landscape,” said Arnaud Masset, an analyst at Swissquote Bank SA in Gland, Switzerland. “The high uncertainty surrounding the vote will keep assets volatile.”
Commodities
West Texas Intermediate crude fell 0.3 percent to $40.23 a barrel after climbing 1.6 percent last session and 6.6 percent on Friday. The Organization of Petroleum Exporting Countries and other major producers such as Russia are set to meet in the Qatari capital Doha on April 17 to decide on a possible freeze in output in an attempt to shore up prices, which tumbled 30 percent last year following a 46 percent slide in 2014.
Gold dropped 0.3 percent in the spot market to $1,253.84 an ounce, following last session’s 1.4 percent surge on the weaker dollar.
Wheat declined as much as 0.2 percent after sliding 2.8 percent on Monday, the biggest loss since November. U.S. wheat inventories before the 2016 harvest will probably be larger than forecast last month, according to a Bloomberg News survey before the U.S. Department of Agriculture releases its World Agricultural Supply and Demand Estimates report on Tuesday.
Bonds
Australia’s 10-year bond yield climbed six basis points to 2.47 percent after National Australia Bank’s business confidence report reduced the likelihood of an interest-rate cut.
“This is an especially good result in the context of a downbeat global economic outlook,” said Alan Oster, chief economist at NAB. “Monetary policy is likely to remain on hold for an extended period.”
Japan’s 30-year bonds gained, pushing their yield to an all-time low of 0.39 percent. The 10-year yield declined by half a basis point to negative 0.095 percent. Japan’s government bond market is the second biggest in the world and about 70 percent of its securities have sub-zero yields following the Bank of Japan’s adoption of a negative interest-rate policy this year.
“Even if they don’t decide to cut negative rates further, extreme monetary easing will continue so any bonds with positive yield tends to attract buyers,” said Shinji Hiramatsu, general manager of fixed income investment department at Sompo Japan Nipponkoa Asset Management Co. in Tokyo. [Bloomberg]
FTSE 100 Outlook and Prediction
Well here we are at 6200 just for a change! The bulls need to break the 6230 level today where we have the top of the 20 day Bianca channel, which would open up 6250 where we then have the top of the 10 day Bianca and Raff channels, so both fairly big obstacles. Todays pivot is 6190 so there is initial support there. As such, if the 6190 area holds initially today then we may well try for that 6230 level again. If the bulls were to break 6250 then 6275 is on the cards, and possibly that 6350 I mentioned a while ago. There is a fairly decent rising channel on the 30min chart as well, with support at 6160 (tallying with yesterday low area) and resistance at around the 6250 area (depending on when/if it hits that line). We have hit the 200ema on the 30min overnight at 6170 and that has held alright, for a bounce up towards 6200 again, which is why I think we might see a bit of a bounce further today. I am watching that 6190 and 6230 , 6250 areas as support and resistance for today. However, if we break below 6170 then we could drop down towards 6150 and then 6100 so be worth flipping to short.