Support 6118 6092 6088 6078
Resistance 6170 6171 6173 6197 6220
Good morning. Nice little bounce from 6150 yesterday to get a few points and it stopped just short of the 6200 target. Since then its dropped off and Asia was weak overnight, and with NFP today the tide might well be turning for a run down towards 6010. The bulls really have failed to get 6200 to stick.
US & Asia Overnight from Bloomberg
- Japanese shares slide most in seven weeks after Tankan slump
- Copper buoyed as official China manufacuring index improves
Asian stocks slumped with oil as a new quarter got under way, with Japanese equities leading losses amid deteriorating corporate sentiment. Metals rose after a gauge of Chinese manufacturing expanded for the first time since July.
After recording its best month since October, an Asian equities benchmark index was headed for its biggest loss in seven weeks Friday. The yen resumed gains amid a flight to haven assets in Japan. China’s stocks reversed earlier gains as the jump in the official factory gauge was overshadowed by a cut in the nation’s credit rating by Standard & Poor’s. Crude fell back below $38 a barrel on glut concerns.
Friday’s data onslaught, which includes manufacturing data for the euro area and the highly-anticipated U.S. payrolls report, will help investors re-calibrate following a quarter of contrasts. After sliding on concerns about China in the first two months of the year, global equities clawed back most of their losses in March as policy makers around the world signaled they stood ready to bolster flagging growth. Bets on further U.S. interest-rate increases this year have been scaled back, while anxiety over China’s economy remains despite rebounding factory activity.
“There’s probably some effect from the Tankan,” said Yoshihiro Okumura, a general manager at Chiba-Gin Asset Management Co. in Tokyo. “With corporate earnings peaking out, it’s becoming more and more difficult to envision profits this fiscal year.”
Stocks
The MSCI Asia Pacific Index lost 2.2 percent as of 1:30 p.m. Tokyo time, the biggest decline since Feb. 12. The gauge added 8.2 percent in March, paring back its quarterly loss to 2.3 percent. Japan’s Topix index slipped a fourth day, tumbling 3.1 percent as the country’s Tankan surveys of business conditions indicated sentiment among large manufacturers was the weakest since mid-2013.
Australia’s S&P/ASX 200 Index slid 1.6 percent, falling for the first time in three days after capping its best month since October. New Zealand’s S&P/NZX 50 Index slipped 0.7 percent, while the Kospi index in Seoul declined 0.9 percent and Hong Kong’s Hang Seng Index lost 1.3 percent. The Shanghai Composite Index was down 1.4 percent, after rising as much as 0.1 percent.
The official manufacturing purchasing managers index jumped to 50.2 in March, compared with a median estimate of 49.4. A private PMI reading from Caixin Media and Markit Economics rose to 49.7. Readings above 50 signal improving conditions. Seasonal volatility is one factor behind the rebound, according to an NBS statement released with the data, as factories started to run machines again after the lunar new year holiday in February. S&P cut China’s rating outlook from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected.
Futures on the S&P 500 Index fell 0.3 percent. While the U.S. benchmark’s losses Thursday cut its rally in the quarter to 0.8 percent, it marked the first time since 1933 the gauge has capped a three-month increase after sliding more than 10 percent during the period.
Currencies
The yen, which typically moves at odds with Japanese shares, gained 0.3 percent to 112.27 per dollar, strengthening for the third time in four days. The currency was the second-best performer in Asia in the first quarter, climbing 6.8 percent amid risk-asset volatility. The euro held four days of gains, trading at $1.1374. The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed near its lowest level since the end of June.
The Aussie was little changed at 76.52 U.S. cents, paring an earlier advance of 0.6 percent after China’s official PMI.
“The market got a little shot in the arm on the stronger prints, but we would interpret with caution,” said Sue Trinh, head of Asian foreign-exchange strategy at Royal Bank of Canada in Hong Kong. “There is evidence that the great rebalancing is stalling. This risk rally appears to be running out of puff. Payrolls will provide the key directional cue for markets, even if it may no longer have direct near-term implications for the Fed.”
Commodities
Copper for three-month delivery in London gained 0.1 percent, while aluminum rose 0.3 percent. Gold is heading for a weekly advance before the release Friday of a U.S. payrolls report. Bullion for immediate delivery slid 0.2 percent to $1,230.43 and is up 1 percent this week.
Oil headed for the first weekly decline since February as OPEC output rose and expanding U.S. stockpiles kept inventories at the highest level in more than eight decades. Crude futures declined 1.4 percent to $37.80 in New York. The Organization of Petroleum Exporting Countries increased supply by 64,000 barrels to 33.09 million a day in March as Iraqi output gained and Iran pumped at the highest level in almost four years, according to a Bloomberg survey of oil companies, producers and analysts. U.S. government data Wednesday showed crude supplies rose for a seventh week to the most since 1930.
Bonds
Treasuries fell, trimming this week’s gain, as an economic surprise gauge showed U.S. data are surpassing analysts’ forecasts for the first time in more than a year. U.S. 10-year note yields rose 2.5 basis points to 1.795 percent.
The Bloomberg ECO U.S. Surprise Index climbed above zero Thursday to the highest level since January 2015. A government report Friday will show the U.S. added more than 200,000 jobs for a second month in March while wages increased from February, based on a Bloomberg survey of economists.
“People are taking profit before the employment report,” said Toshifumi Sugimoto, the chief investment officer at Capital Asset Management in Tokyo. “If average hourly earnings — the inflation number — rise, yields will go up.” [Bloomberg]
FTSE 100 Outlook and Prediction
It’s NFP news today at 1330 so things are quite possibly going to get a bit choppy around then. The NFP report is expected to show that the US added 205,000 jobs in March, down from 242,000 in February. No change is expected for the unemployment rate, which is currently at 4.9%. Average hourly earnings are expected to rise by 0.2%, after declining by 0.1% in February. I can see a bit of buy the rumour, sell the news today, (though as its Friday its often prudent to reduce the risk a little bit with lower stakes), and a rise to 6170 area where there are a cluster of resistance levels – the daily pivot, the 30min coral, and the Hull Moving average on the 2 hour. As such I think a short from this area will be good. Another reason I think an initial rise is that its the first the month so new money flows in. However, I am still feeling bearish as per yesterday for a run down towards 6000, so any rallies are still worth shorting. It feels like the climb from 5500 to 6200 is running out of steam. If however the bulls manage to break 6175 then we will probably reach 6200, and maybe Wednesdays 6222, which is also the 10 day Bianca channel top area (and worth shorting). So, fairly simple plan today really with the rise and dip from the 6170 area.