Good morning. The FTSE plan for yesterday worked pretty well with the dip from the 6596 down to 6558 and rise, though it stalled at 6590 rather than reaching the 6606 level (which maybe would have been too perfect) before the US come online, and gave a massive V sign to the world with the price action, dragging the FTSE down from 6590 to 6501 then bouncing back to 6590 this morning. Was certainly volatile anyway, not helped by the Ukraine situation rumbling on.
The main overnight news is that China’s expansion moderated to the weakest pace in six quarters and property construction plunged, testing leaders’ commitment to keep reining in credit as risks mount of a deeper slowdown.
Asia Overnight from Bloomberg
Asian stocks rose for the first time in four days, with the regional benchmark index climbing from a two-week low, after U.S. technology shares rose and investors weighed slowing Chinese economic growth.
Chinese Data
Gross domestic product rose 7.4 percent in the January-to-March period from a year earlier, the statistics bureau said today in Beijing, compared with the 7.3 percent median estimate in a Bloomberg News survey of analysts. Industrial production and fixed-asset investment trailed projections.
The weakest first-quarter property-investment growth since 2009 signals credit is tight and demand is faltering, adding to economic and default dangers as Premier Li Keqiang grapples with risks from shadow banking and local-government debt. A deeper slowdown would put pressure on leaders to expand stimulus or limit the pace of changes intended to give market forces a bigger role in the world’s second-largest economy.
Investors are “slightly more positive after this set of Chinese data,” Peter Esho, Sydney-based chief market analyst at Invast Securities Co., said by phone. “The big thing is that there’s an absence of real negative news. The wildcard is still that the Chinese announce some form of stimulus in the next couple of weeks.’
The MSCI Asia Pacific Index added 0.7 percent to 138.11 as of 10:51 a.m. in Hong Kong, with all 10 industry groups rising. The measure closed yesterday at its lowest in two weeks, taking its loss this year to 2.9 percent, as a stronger yen weighs on the earnings outlook for Japanese exporters and concern grows that China’s expansion is waning.
China Slowdown
China’s economy expanded an annualized 7.4 percent in the three months through March, the slowest pace in six quarters. Economists surveyed by Bloomberg News had expected a 7.3 percent advance, and growth slowed from 7.7 percent in the last quarter of 2013. Industrial production increased 8.8 percent in March from a year earlier, less than projected, while first-quarter fixed-asset investment trailed estimates.
”The GDP number is not bad,” Zhiwei Zhang, Hong Kong-based chief economist for China at Nomura Holdings Inc., told Bloomberg TV. “Industrial production improved a little bit and there will be a debate in the market as to whether this is a temporary recovery or a sustainable recovery. We think it’s temporary. Momentum will again slow in the second quarter and this is mostly driven by the property sector slowdown.”
Standard & Poor’s 500 Index futures rose 0.3 percent today after the U.S. equities gauge yesterday gained 0.7 percent as earnings from Coca-Cola Co. and Johnson & Johnson overshadowed concerns that tensions in Ukraine are worsening.
FTSE Outlook
The trade plan worked well yesterday with the dip from the 6596 area to the 6558 pivot (slight overshoot) before climbing back and all looked good to hit the 6606 target until the US came online and the S&P dipped off the 10EMA on daily at 1842 taking the FTSE with it. And tumble it did, all the way to 6501. Anyway, for the FTSE today we are still looking good within the 10 day Bianca channel with resistance at 6609 and support at 6501 for today. Todays pivot is 6556 so with the recovery yesterday evening I think any dip to the pivot is likely to be bought as we could push up to the 6609, 6628 and 6670 areas soon.
We are currently in a double top with yesterday area at 6587 so a dip from here would make technical sense, bit of a repeat of yesterday in fact. The US might be a bit more optimistic later today as well if they continue yesterdays buying.
There is a pretty decent rising 30 minute channel with extremes at 6535 and 6643 so that is the slightly wider range for today. If the bottom of the channel were to break then a revisit of 6512 is likely.