Good morning. It appeared the FT100 may try and break through the 6450 level but in later trade fell back to close around 6420. In after hours trading it has fallen below 6400 on the back of comments by Federal Reserve Chair Janet Yellen suggesting the U.S. central bank may be ready to raise rates.With hindsight that 6440 trade could have netted a few more points, but with Yellen talking the safer bet was to bank the profit I thought. The ECB has various announcements and meetings tomorrow and so this will affect the FT100 quite significantly probably. On many technical indicators the market looks quite overbought above 6400, so today could be the start of a down leg …. but as we know nothing is for sure. The best performing sector was pharmaceuticals on the back of positive broker comments and commodity shares were the weakest.
US & Asia Overnight from Bloomberg
Asian stocks fell for a second day, following U.S. equities lower, as a drop in oil weighed on energy shares.
The MSCI Asia Pacific Index lost 0.2 percent to 133.59 as of 9:01 a.m. in Tokyo, with material and energy companies leading losses among the regional measure’s 10 industry groups. U.S. crude traded at $40.20 a barrel after slumping to $39.94 in the previous session amid signs of discord between members before Friday’s OPEC meeting in Vienna. The Standard & Poor’s 500 Index dropped 1.1 percent on Wednesday as tumbling oil prices sparked a broader selloff in equities and Federal Reserve Chair Janet Yellen laid the groundwork for a December interest-rate increase by signaling higher confidence in the U.S. economic outlook.
“The decline in commodity prices is reflecting the downturn in global economic conditions, with emerging countries at the center of that,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “Yellen’s speech was as expected and showed that they plan to start normalizing rates in December.”
In a speech at the Economic Club of Washington, Yellen also warned that waiting too long to end the era of near-zero interest rates could force the central bank to tighten too quickly, which would risk disrupting financial markets and the six-year expansion.
ECB Decision
The European Central Bank is expected to cut its deposit rate and further expand asset purchases at its meeting Thursday, kicking off a crucial 48-hour period for global markets. Yellen will speak before the U.S. Congress and November payrolls data is due Friday, probably the most-anticipated piece of American data before the Fed’s Dec. 16 interest-rate decision.
Australia’s S&P/ASX 200 Index fell 0.4 percent. BHP Billiton Ltd. lost 1.7 percent, the largest drag on the Australian benchmark gauge and the second-biggest on the regional measure.
A majority of Organization of Petroleum Exporting Countries members agree on an output cut, with the exception of Saudi Arabia and Gulf Arab countries, the Iranian Oil Ministry’s Shana news agency said. Saudi Arabia cut pricing on January oil sales to the U.S., signaling the kingdom is fighting for market share. U.S. crude supplies rose to 489.4 million barrels, the most for this time of year since 1930, government data show. The surging dollar helped spur a broad commodity slump.
Regional Gauges
Japan’s Topix index fell 0.2 percent after the yen slid 0.3 percent against the dollar on Wednesday. South Korea’s Kospi index lost 0.7 percent, while New Zealand’s S&P/NZX 50 Index slipped 0.3 percent.
Futures on Hong Kong’s Hang Seng Index fell 0.1 percent in most recent trading, while contracts on the FTSE China A50 Index added 0.1 percent. The Shanghai Composite Index climbed 2.3 percent on Wednesday, the most in a month, as financial companies rallied on prospects for monetary stimulus.
Futures on the S&P 500 were little changed. Wednesday’s decline in the underlying benchmark gauge reversed a surge the previous day. [Bloomberg]
FTSE Outlook and Prediction
The main focus today is going to be on the ECB and their announcements which will make things a bit choppy. However, we have resistance at the 6417 area on the 2 hour chart which looks good for a possible short, and above this the 10 day Bianca at 6463 and the 30min channel just below that at 6459 – also worth a short here if the bulls manage to break through the 6420 resistance area. With the bulls failing to break through the 6440 level yesterday though, they might not be able to push too much higher. Support wise 6330 is the 25ema on the daily and also the bottom of that 30min channel so a long is worth a go at this level as well. Tight stops are the order of the day today though. Wont be long till talk turns to the “Santa Rally” and the possible rise in indies in the run up to Christmas. Historically (thanks to one of the members for looking at this stat) the best time to buy was at the open on the 16th December and close at the open on the 6th January to capitalise on this phenomenon. So anyway, for today, I am looking for a dip down towards 6330.