Support 6124 6123 6111 6084 6080
Resistance 6181 6193 6208 6224 6248
Good morning. Turned into quite the V shaped day yesterday, with he recovery helped by Yellen later int he day. Was a bit early with he FTSE long at 6116, however the earlier short from 6150 did well. In one of her most detailed policy discussions this year, Yellen gave a clear message that interest rates will be raised at a cautious pace.Yellen also drove home the message that when officials don’t know, they either don’t change policy at all, or only move gradually.
US & Asia Overnight from Bloomberg
- Fed chief signaled rates likely to stay lower for longer
- Resurgent yen hits Tokyo shares; Malaysia adds to bull market
Asian stocks outside Japan surged and bonds climbed after Federal Reserve Chair Janet Yellen reasserted the central bank’s gradual approach to raising interest rates. Oil rallied as the dollar headed for its worst month in almost five years.
Shares from Kuala Lumpur to Seoul and Shanghai rallied after U.S. equities erased their losses for the year, with Yellen indicating deteriorating world growth warranted a slow approach to tightening monetary policy. The comments ignited gains in government debt as diminishing prospects for first-half U.S. rate increases had the Bloomberg Dollar Spot Index near a five-month low. Japanese stocks retreated amid a revival in the yen, while U.S. oil gained for the first time in five days. Nickel climbed as copper and gold retreated.
Traders reduced bets on a Fed rate increase next month to zero after Yellen dialed back some of the commentary made by other policy makers the past two weeks, emphasizing during her appearance at the Economic Club of New York that the central bank remains wary of raising rates amid threats to American growth from a slowing global economy. Financial markets have been hanging on the outlook for U.S. borrowing costs since the Fed reduced the expected pace of rate increases this year to two from four at its March gathering. Since then, some Fed officials had asserted that every meeting remains in play.
“For the first time in a long time, Janet Yellen speaks and markets go up,” Niv Dagan, executive director at Peak Asset Management LLC in Melbourne, said by e-mail. “It is clear that U.S. interest rates won’t rise any time soon.”
Stocks
The MSCI Asia Pacific excluding Japan Index climbed 1.3 percent as of 12:42 p.m. Tokyo time, rising for the first time in six days to snap its longest slump in more than a month. MSCI’s broader, dollar-denominated Asia Pacific gauge, which includes Japan, added 0.8 percent, even as the Topix index slid 0.7 percent in Tokyo. The regional benchmark has surged 8 percent in March, its best performance since October.
The yen, which often moves at odds with Japanese shares, climbed a second day, adding 0.2 percent to 112.49 per dollar after snapping a seven-day decline on Tuesday. The Japanese currency is headed for a 0.2 percent advance in March, after surging 7 percent in February. Japan’s Nikkei 225 Stock Average was down 0.5 percent, paring its advance this month to 6.2 percent.
The Shanghai Composite Index jumped 1.4 percent along with Hong Kong’s Hang Seng index gained 1.4 percent, while the Hang Seng China Enterprises gauge soared 2.1 percent.
Australia’s S&P/ASX 200 Index was up 0.1 percent. The Kospi index increased 0.3 percent.
Malaysia’s benchmark stock index, the FTSE Bursa Malaysia KLCI Index, rose 0.3 percent, extending the world’s longest bull-market run. The gauge has more than doubled from its 2008 lows without succumbing to a 20 percent drop.
Futures on the Standard & Poor’s 500 Index added 0.1 percent following a 0.9 percent jump in the U.S. benchmark that put it back at levels last seen at the end of 2015.
Yellen’s speech “painted a very dovish picture for the inflation outlook in 2016, and although she didn’t directly use this term, she clearly sees the U.S. economy as two-speed,” Evan Lucas, a markets strategist at IG Ltd. in Melbourne said in an e-mail to clients. “The yen now has to contend with negative rates not having the desired effect, the Bank of Japan assessing other unconventional monetary policy options and a U.S. central bank unlikely to raise rates.”
Currencies
As the yen extended gains, South Korea’s won paced a rally in Asian emerging-market currencies. Bloomberg’s dollar index held declines after sliding 0.8 percent last session. The gauge, which tracks the greenback against 10 major peers, has lost 3.4 percent in March, set for a second straight monthly drop.
The won surged 0.8 percent as the combination of the weaker dollar and crude oil’s rebound spurred a 1 percent gain for Malaysia’s ringgit. The Thai baht strengthened for the first time this week.
The Fed would act “cautiously” as it looks to raise rates against a backdrop of deteriorating global growth, Yellen said. Policy makers including St. Louis Fed President James Bullard and San Francisco Fed boss John Williams said last week that higher borrowing costs were possible as soon as next month.
“Yellen indicated that core Fed members take into account the global context more than regional officials,” said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. in New York. “A June rate hike would be difficult as global financial turmoil earlier this year affects the real economy with a time lag.”
Odds of a U.S. rate rise next month slipped to zero Tuesday, from 10 percent a week ago, while the probability of an increase at the Fed’s June meeting declined to 28 percent, from 46 percent a week earlier, according to futures trading tracked by Bloomberg.
Bonds
Australian government debt led the charge higher in Asia, with 10-year yields sliding seven basis points, or 0.07 percentage point, to 2.50 percent. Rates on similar maturity Korean bonds dropped two basis points to 1.80 percent, while yields on Japanese notes due in a decade declined one basis point to minus 0.1 percent.
Yields on 10-year Treasuries were little changed at 1.81 percent after they fell eight basis points last session. A bond-market gauge of inflation expectations rose Tuesday as investors bet on a faster pace of price increases.
Commodities
West Texas Intermediate crude snapped a four-day, 7.7 percent tumble to rise 0.7 percent Wednesday, to $38.55 a barrel. Brent crude gained 0.4 percent to $39.30. The weaker dollar makes crude and other commodities cheaper in other currencies.
Nickel for three-month delivery advanced 0.5 percent to $8,495 a metric ton on the London Metal Exchange, while copper retreated 0.2 percent to $4,883. Gold declined 0.6 percent to $1,234.96 an ounce in the spot market following a 1.7 percent jump last session. [Bloomberg]
FTSE 100 Outlook and Prediction
After a dovish Yellen yesterday the bulls might have a bit more fuel in the tank as they did manage to get it back above 6100 yesterday after the brief foray below. Still got 6200 as the line in the sand for the moment, but any weakness is likely to reach 6010 at some point soon. For today we have some initial support at 6124 which looks worthy of a long – daily pivot and the 30min coral at this level, as well as the Hull moving average on the 2 hour chart. So we might well see some upside towards the 6193 level which is the 200ema on the daily, and the 6208 10 day Bianca channel top. I have an initial rise to 6155 on the radar, with the 10min chart showing some resistance here. Just looking at the S&P, the bulls managed to defend the 2030 level (closed that long far too early in case Yellen’s speech talked it down). Below that then 2020 is the next support with 1990 below that. Bulls will be aiming for 2067. Anyway, FTSE plan is fairly simple with that 6125 long area looking decent.
There is also a 2.17 dividend today, which will affect open daily positions.