Support 6131 6122 6087 6079 6054
Resistance 6152 6154 6156 6161 6183 6209 6234
Good morning. Interesting Friday session that saw an early sell off rather than a buy the rumour morning, as NFP came out at 1330. A rally from the 6080 support level, largely driven by the US saw the 6150 level once again, which the bears probably thought had been left behind as we dipped below 6100. Mostly the rally was driven by the spectre of delayed rate rises once again, whilst payrolls in the U.S. grew by 215,000 workers last month, more than the 205,000 predicted by economists, and February’s increase was revised to 245,000.
US & Asia Overnight from Bloomberg
- Saudi Arabia says output freeze hinges on Iran taking part
- China, Hong Kong and Taiwanese markets closed for holidays
Asian stocks rose as investors maintained bets the Federal Reserve will proceed cautiously on raising interest rates, even as data show the world’s biggest economy is strengthening. Oil slid after Saudi Arabia backed away from a commitment to freeze crude output.
The Asian equity benchmark rebounded from its worst day since mid-February after strong U.S. manufacturing and jobs reports had little impact on speculation that the Fed will hold off from tightening policy until near the end of the year. Crude extended last session’s tumble after Saudi Arabia’s deputy crown prince said the kingdom will only arrest production if Iran does. The yen touched a two-week high as the greenback held losses. Copper declined as bonds rose, while Australia’s dollar slid after retail sales missed estimates.
Odds of the Fed hiking rates by November held at about 50-50 as data showed U.S. manufacturing expanded for the first time in seven months and more workers than expected were added to nonfarm payrolls last month. Risk assets rallied in March amid a pullback in the dollar after the Fed reduced its outlook for rate rises this year to two from four. Chair Janet Yellen reaffirmed the go-slow approach in a speech last week.
“Yellen is exceptionally dovish,” Mark Matthews, head of Asia research and a managing director at Bank Julius Baer & Co. in Singapore, said on Bloomberg Radio. “She’s probably going to let the recovery run hot for a while. This is all great for stocks.”
Markets in mainland China, Hong Kong and Taiwan are shut for holidays. A manufacturing index for India is due.
Stocks
The MSCI Asia Pacific Index added 0.4 percent as of 12:53 p.m. Tokyo time, after sliding 2.3 percent on Friday.
Japan’s Topix index fluctuated, while utilities and health-care stocks led Australia’s S&P/ASX 200 Index to a 0.7 percent advance. New Zealand shares gained 0.5 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.1 percent, following a 0.6 percent increase in the American benchmark at the end of last week.
Payrolls in the U.S. grew by 215,000 workers last month, more than the 205,000 predicted by economists, and February’s increase was revised to 245,000. The unemployment rate rose to 5 percent from 4.9 percent as more people sought work, according to the government data.
“Friday’s U.S. labor market report was something of a middling result for markets,” Philip Borkin, a senior economist in Auckland at ANZ Bank New Zealand Ltd., wrote in a client note. “On the one hand it was not really strong enough to suggest inflation pressures are going to run away on the Fed, but on the other, it certainly still showed, together with a rebound in the ISM, that the economy is still performing well overall.”
Commodities
West Texas Intermediate crude slumped 1.2 percent to $36.36 a barrel Monday, extending Friday’s 4 percent tumble. Brent was down 0.9 percent to $38.32 after losing 4.1 percent.
Middle Eastern equities slid Sunday, with shares in Saudi Arabia dropping to a five-week low, after Mohammed bin Salman, who has emerged as a leading political force, challenged the country’s main regional rival and other major oil producers to take an active role in stabilizing the market. Iran has already said it plans to boost production after sanctions were lifted following a deal to curb the country’s nuclear program.
“If all countries agree to freeze production, we’re ready,” bin Salman said in an interview with Bloomberg. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”
Copper dropped 0.4 percent on the London Metal Exchange, with zinc was down 0.8 percent and tin losing 0.9 percent.
Currencies
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling for five days, and was close to its weakest level since June.
The probability of an increase in U.S. rates by December has slipped to 62 percent, from 73 percent a week ago, according to Fed funds futures compiled by Bloomberg. Yellen has said the central bank will “proceed cautiously” when it comes to monetary policy given the heightened risks to the global economy.
“A string of stronger data than this is needed for the dollar to regain its pro-cyclical advantage,” said Peter Frank, global head of Group of 10 and Asian currency strategy at Banco Bilbao Vizcaya Argentinaria SA in London. “Much will depend upon Fed’s perceived reaction function, which seems to be as much a reaction function tied to external factors as it is tied to the U.S. domestic economic outlook.”
The Aussie weakened 0.6 percent to 76.29 U.S. cents, after climbing 2.3 percent last week. Retail sales were little changed in February from a month earlier, a report showed, missing economists’ forecast for a 0.4 percent gain. The nation’s central bank reviews monetary policy on Tuesday, when it’s expected to hold borrowing costs at a record low.
The won led gains in Asia, strengthening for the fifth time in six days. The yen added 0.2 percent to 111.46 per dollar after jumping 0.8 percent on Friday amid the greenback’s retreat.
Bonds
Treasuries climbed, after ending Friday little changed, with 10-year yields slipping one basis points, or 0.01 percentage point, to 1.76 percent.
In Asia, Australian government notes led gains, with yields on debt due in a decade down six basis points to 2.47 percent. Rates on similar-maturity Japanese bonds fell one basis point to minus 0.08 percent. [Bloomberg]
FTSE 100 Outlook and Prediction
There are a few resistance levels on the different time frames around the 6150 to 6160 area so I think if we get a rise to this area its worth a short here. The FTSE 100 was pulled up by the S&P on Friday, however, whilst that has pushed higher to 2073, the FTSE has remained below 6200 (when the FTSE was last at 6200 the S&P was struggling at 2050). Any S&P weakness is therefore likely to see a weak Europe as well. Support wise 6123 is showing as decent support on the 30min where we have a positive, rising 30min coral line, so any dip to this area might well find some support here, at least initially. We also have the daily pivot at 6131. Monday mornings are always hard to pin down exactly but the 6160 and 6130 areas look good for initial moves. The 2 hour chart is still bearish, and is flagging that 6160 area as a short as well, whilst the 10 day Bianca channel has dipped below the 20 day for the first time in a while – so slightly weakening bigger picture. Could be on for a retest of Fridays lows as well early this week.