Good morning.
Market Summary for Thursday
The FT100 opened a bit nervously but then ground its way up during the day with only a small retrace around the Wall Street open. The two main factors were a rise in oil prices which went above $30 for a brief time and the ECB indicating it may be willing to stimulate the eurozone economy again. Whether this is a rally in a bear market or the basis for a sustained recovery is unclear, so caution is still the key word. The best performing sectors were oil and commodities with “safer” shares being the least positive.
US & Asia Overnight from Bloomberg
Asian stocks rose, with the regional benchmark index rebounding from a three-year low, following a rally in U.S. shares and oil amid optimism that policy makers in Europe and Asia will step in with more stimulus measures.
The MSCI Asia Pacific Index gained 1.6 percent to 116.33 as of 9:15 a.m. in Tokyo. The gauge is heading for its third week of losses amid turmoil in Chinese markets and the rout in commodities that’s sent crude oil below $30 a barrel. The European Central Bank said it may bolster support as soon as March, while China’s vice president Li Yuanchao said the government is willing to intervene to tamp down market volatility. The Nikkei Asian Review reported that the Bank of Japan, which meets next week, is considering steps to counter the hit to inflation of crude’s slide.
“With further hopes for policy coordination among the central banks, the market will be supported,” said Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo. “Things will still be volatile, but we’ll generally be rising.”
Global equities halted losses Thursday on the brink of a bear market as oil rallied and the ECB signaled it may boost stimulus. The MSCI All-Country World Index has dropped 19 percent from a record high in May, amid plunging energy prices, rising U.S. interest rates and concern over China’s ability to manage a transition to services-led growth.
Rally Reversal
Investors have been looking for a sustainable rebound as the selloff has continued since the start of the year. The MSCI Asia Pacific gauge jumped as much as 1 percent yesterday, only to erase those gains in afternoon trading.
“While the statement from Draghi did help boost sentiment overnight, its unlikely this rally will be sustainable,” Angus Nicholson, an analyst at IG Markets Ltd. in Melbourne, said by phone. “Any negative news could easily pop this optimism. China is still in a difficult position. They’re still seeing massive capital outflows.”
Japan’s Topix index jumped 3.1 percent in Tokyo, the most since September. The gauge had fallen 16 percent in January through Thursday, on course for the biggest monthly drop since October 2008. The Topix and the Nikkei 225 Stock Average entered a bear market this week, falling more than 20 percent from 2015 highs.
South Korea’s Kospi index climbed 1.3 percent. New Zealand’s benchmark gauge added 0.5 percent and Australia’s S&P/ASX 200 Index increased 0.9 percent. Markets in China and Hong Kong have yet to start trading.
Below Book
Futures on the Hang Seng Index rose 0.7 percent in their most recent trading. Hong Kong stocks fell below the value of their net assets for the first time since 1998 on Thursday as concerns over capital outflows and China’s economic slowdown sent the benchmark index deeper into a bear market. The Hong Kong dollar traded near its weakest since August 2007, while benchmark money-market rates jumped to a more than six-year high.
Billionaire investor George Soros said China’s economy is facing a hard landing, a situation that will contribute to global deflationary pressures. Soros said while China has resources to manage the situation, the slowdown there has spillover effects on the rest of the world.
E-mini futures on the Standard & Poor’s 500 Index added 0.2 percent. The underlying index rose 0.5 percent Thursday, recovering from a 21-month low, as energy shares rallied with oil.
European stocks jumped by the most in a month as ECB President Mario Draghi said downside risks to the euro-area economy have increased since the year began, and the central bank may need to bolster its stimulus programs as soon as March amid rising concerns about the recovery. [Bloomberg]
FTSE Outlook and Prediction
Here we are at Friday after a crazy week, with things stabilised for the moment, and I think in the middle of a 3 day rally. I think this bounce has legs up to 6050ish before there is more downside towards 5400 and possibly lower, though at the moment I am preferring to focus on whats going to happen today. Another sell off will likely reach 5620 before continuing down. Anyway, for today, we have some fairly positive looking shorter term charts to start off with the 10min and 30min showing bullishness, and a rise to the top of the 20 day Raff at 5850 looking possible first thing. There is also a pretty decent rising 30min channel with resistance around the 5877 level and support around the 5740 area. We do also have the daily Bianca channels showing resistance at 5858 and 5875, so the bulls might have a bit of a struggle to break through these sort of areas, especially going into the weekend. As such, I think some short term shorts around the 5850 area for a dip to 5790 this morning look worth a go, but I expect the 5800ish area to hold as support today. If we are going o get another big down leg then the bears will fall back and regroup ready for the next assault, so the market might just take a bit of a breather today and Monday.