Good morning. The main feature of the day was the news that UK Banks had passed the Bank of England (BoE) stress tests. As an added benefit the BoE governor Mark Carney said there was no new wave of capital regulation for banks in the pipeline. The banking sector lead the move up in the FT100 with Barclays being the top performer. 6400 is still a key level and all eyes are still on the ECB “easing” announcement on Thursday. Oscillation around this level may still persist until the market knows how the ECB will act. Not many of the trade plan orders triggered, with just the S&P long at 2088 running to target at 2097 – which was a good level as it promptly fell back to 2081 before climbing again.
US & Asia Overnight from Bloomberg
Asian stocks held Tuesday’s jump as an unexpected contraction in American manufacturing added to speculation that the pace of Federal Reserve rate increases will be gradual.
The MSCI Asia Pacific Index rose 0.1 percent to 134.25 as of 9:03 a.m. in Tokyo, with about the same number of shares gaining and falling. The measure climbed 1.8 percent on Tuesday to pare its 2015 drop to 2.7 percent. The Institute for Supply Management’s index of U.S. manufacturing dropped to 48.6, the lowest level since June 2009, as elevated inventories led to cutbacks in orders and production.
“The ISM manufacturing figures were terrible. They were at a level indicating a recession,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “The market’s focus is shifting to the pace of rate hikes in the U.S. That pace is likely to be gradual as the American economy doesn’t seem to be as strong as expected.”
Australian GDP
Australia’s S&P/ASX 200 Index slipped 0.5 percent ahead of a reading on the nation’s third-quarter economic growth. Gross domestic product increased 0.8 percent in the period from three months earlier, according to a Bloomberg survey of economists.
Japan’s Nikkei 225 Stock Average lost 0.2 percent after closing above 20,000 on Tuesday for the first time since August. The nation’s broader Topix index added 0.2 percent. South Korea’s Kospi index fell 0.2 percent, while New Zealand’s S&P/NZX 50 Index rose 0.1 percent.
Futures on Hong Kong’s Hang Seng Index added 0.3 percent in most recent trading, while contracts on the FTSE China A50 Index rose 0.4 percent. China’s official purchasing managers index for November was 49.6, a report showed Tuesday, missing economists estimates and coming in at the lowest in more than three years.
E-mini futures on the Standard & Poor’s 500 Index slipped 0.1 percent. The underlying gauge rallied 1.1 percent on Tuesday, with healthcare shares leading gains. The odds of an interest rate increase later this month remained above 70 percent before government payrolls data due Friday.
Global shares have wrapped up the year with a monthly gain on all but five occasions since 1988, with December posting the biggest and most frequent increases of any month, data compiled by Bloomberg show. [Bloomberg]
FTSE Outlook and Prediction
We have support at the 6400 area today to start with as the daily pivot is 6399, the bottom of the 30min channel is 6400 and the Hull moving averages on the 2 hour chart are showing support at 6406. Therefore a long at this level is worth a go, though we are probably going to have another fairly flat day as we head towards the ECB tomorrow. Todays dividend is tiny at 0.8 so there won’t be much of a rise just before the bell this time with the divi hunters. We have a pretty decent rising channel on the 30min chart and the moving averages are all currently bullish, with yesterdays initial charge by the bears firmly rebuffed now, though we do have some resistance at this 6420 area, with 6445 above that. As such I think we will get that initial dip to 6400 before more upside. We also have the commons debate on the bombing of Syria today, expected to be approved really (probably a foregone conclusion anyway). Next step will be boots on the ground.
If the bears break below the 6400 level then 6375 and 6340 are the next support areas to watch, being a fib level and bottom of the 10 day Bianca channel respectively. We also have the 25ema on the daily at 6330 so a long around this area is worth a go if it were to get that low. For the moment it all looks pretty bullish (famous last words!).