Good morning. The FT100 opened positively on Friday after the China markets stabilised overnight, pushing up through the 6000 level. This appeared to be the start of a sustained recovery only to see sellers coming in mid morning. Positive US Non-Farm payroll figures gave another push up for the FT100 with another breach of the 6000 level before a more sustained and aggressive selling phase continued through to the close of 5912.
The key problems are still the effects of a slowing China economy and its impact on world exporters with very little sign of a recovery. Oil is also suffering from lack of demand and over supply which is knocking the FT100 as it is heavily weighted to oil and commodity shares.
This was the worst week for the start of a New Year since 2000, so this shows how severe trading has been this week.
US & Asia Overnight from Bloomberg
Asian stocks declined, with a regional measure falling to its lowest level in more than four years, as concern about China’s growth outlook continued to fan a global selloff.
The MSCI Asia Pacific excluding Japan Index tumbled 2.1 percent to 374.20 as of 9:44 a.m. in Hong Kong, heading for its lowest close since October 2011, after sinking 7.1 percent last week. Markets in Tokyo are closed Monday for a holiday. Turmoil in China’s markets rippled around the world in the first week of 2016 as the securities regulator scrapped an equity circuit breaker after just four days and the central bank set a weaker yuan fix for eight days in a row, escalating fears of a global currency war.
“The market is concerned about China’s financial stability, with investors looking for more visibility about how the new foreign exchange regime is going to work,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, said by phone. “People are also quite nervous about the Chinese economic outlook. China is certainly slowing on a very gradual path down. A lot of people are fearing a hard landing is in play, but that’s not our central scenario. There’s a lot of policy ammunition left in China.”
Yuan Fix
China’s Shanghai Composite Index slid 1.5 percent, while the Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong declined 3.2 percent. The offshore yuan erased early losses after China’s central bank kept the currency’s daily fixing stable for the second day in a row.
China’s consumer price index rose 1.6 percent in December from a year earlier, the National Bureau of Statistics said on Saturday. That followed a gain of 1.5 percent in November. The producer price index fell 5.9 percent, extending its record run of declines to 46 months.
Australia’s S&P/ASX 200 Index fell 1.9 percent and New Zealand’s S&P/NZX 50 Index lost 0.9 percent. South Korea’s Kospi index slipped 0.9 percent. Hong Kong’s Hang Seng Index sank 2.5 percent. Singapore’s Straits Times Index dropped 1.9 percent and Taiwan’s Taiex index slumped 1.8 percent.
E-mini futures on the Standard & Poor’s 500 Index dropped 0.6 percent on Monday after U.S. stocks capped the worst start to a year on record last week.
Employers added 292,000 workers to payrolls in December, exceeding the highest estimate in a Bloomberg survey and putting the gain for all of 2015 at 2.65 million, a Labor Department report showed on Friday. [Bloomberg]
FTSE Outlook and Prediction
After a fairly bearish Friday and a weak opening to the week in Asia, the bulls have managed to bounce the FTSE quite nicely off the 5850 level and the 10minute chart to start the week doesn’t look as bearish as it could have done. It’s actually showing support from the moving average at 5887, with 5866 below that, so if the bulls come out fighting this morning at 8am, we might well see these levels holding and a rise back up. On the daily chart however, we have 6097 as 25ema resistance so the bulls will need a special week to break back above 6000 and then that area as well. The 30min chart has resistance at 5920 initially which might well cap any early bull activity, but could well give us a dip to load up a long on, if we play out as per the arrows. If the bears break through the 5850 support then the next area of note is 5825 and then 5770