Good morning, I hope you had a nice weekend. The FT100 opened strongly on Friday but at 10:10am with options and futures expiring the market took a negative tone. The “quadruple witching” along with the addition of index rebalancing lifted volumes and volatility sending most shares negative. The laggards of the last few days which contained oil and commodity sectors managed to counter this move and were the one bright spot on a negative day. Oil and commodity prices are still driving the market and in after hours things again turned negative to hit a low of 6000. The shorts that we had placed did well, though moving the stop to breakeven on the FTSE was premature, but the Dax and S&P ones delivered well, as did the gold long. This week is likely to see pretty low volumes, and possibly a bit more volatility due to that and it remains to be seen if and when the Santa Rally will start.
US & Asia Overnight from Bloomberg
- S&P 500 futures rise, signal rebound for U.S. stocks
- Asian shares poised for first back-to-back losses since 2002
Asian stocks fell as a stronger yen weighed on Japanese exporters and Toshiba Corp. tumbled on reports it would post a record loss.
The MSCI Asia Pacific Index declined 0.4 percent to 129.24 as of 9:21 a.m. in Tokyo. Japan’s Topix index dropped 0.9 percent after the yen strengthened 1.1 percent against the dollar on Friday. The regional benchmark gauge is down 6.3 percent this year, on course for its first back-to-back annual declines since 2002, as a commodity rout deepened and investors speculated Chinese authorities will need to increase stimulus to support economic growth. The loss would be more than twice that for the Standard & Poor’s 500 Index, which has dropped 2.6 percent in 2015.
“The problems that have been affecting both markets and the global economy for months remain in place,” said Stewart Richardson, chief investment officer at RMG Wealth Management in London. “Commodity prices remain low, corporate debt remains too high and emerging markets continue to struggle. Furthermore, although Federal Reserve Chair Janet Yellen continues to characterize the U.S. economy as strong, it does appear to be slowing down.”
Toshiba sank 8.9 percent, on course for its lowest close since 2012, after reports it would post a record 500 billion yen ($4 billion) loss in the current fiscal year on costs related to an accounting scandal, layoffs and sales of business units.
South Korea’s Kospi index gained 0.1 percent. Australia’s S&P/ASX 200 Index rose 0.3 percent, as did New Zealand’s S&P/NZX 50 Index.
Asian equities retreated Friday as investors shifted from relief after the U.S. Fed’s interest rate hike to disappointment over plans by Japan’s central bank. The Bank of Japan modified its stimulus program to lengthen the average maturities of government bonds it buys and unveiled new measures to purchase exchange-traded funds. Governor Haruhiko Kuroda said the changes were designed to make it easier for the BOJ to maintain its current policy and didn’t constitute additional easing.
The safe-haven yen held most of its biggest gain in more than a week Monday amid a continuing rout in the price of oil. West-Texas intermediate crude declined 0.7 percent after posting a third week of losses to trade at the lowest level in more than six years. Energy shares in the regional Asia equity index gained 0.3 percent.
In Hong Kong, futures on the Hang Seng and Hang Seng China Enterprises gauges lost at least 0.5 percent, while those on the FTSE China A50 Index were down 0.2 percent.
Futures on the Standard & Poor’s 500 Index rose 0.3 percent Monday. The underlying gauge closed 1.8 percent lower on Friday, completing its worst two-day slide since Sept. 1. The U.S. equities gauge extended declines in the final 15 minutes of trading and volume soared because of a quarterly event known as quadruple witching, when futures and options contracts on indexes and individual stocks expire. [Bloomberg]
FTSE Outlook and Prediction
So here we are heading into Christmas week. I expect we will get low volume and increased volatility this week and there is still the possibility of a rally, though I think 6500 might be a bit of a big ask at this late stage, some amazing news not withstanding. Last year the run of daily rises started quite late I seem to remember. However, its not a great sign that the bulls failed to hold onto the recent rises after the rate rise announcement. 6001 looks like its worth a long to start with and the bulls will need to make that stick and break through the daily pivot at 6035 to push higher towards 6100. The long timeframe moving averages are pretty bearish still and the bulls will need to break 6100 today or tomorrow to make inroads into turning them round. On the bearish side, if 6000 breaks then a trip to 5900 again looks likely, with 5808 below that were we have the bottom of the 20 day Bianca. 5913 is the 10 day Raff so I think that this area will hold if we do drop again today.