Good morning. Pretty bearish day yesterday as expected, though it didn’t quite reach that 6385 level first thing before dropping 100, instead deciding to drop from 6382! Having breached 6300, the bulls have fought back a bit and there are a few buying signals starting to appear so we might well get a decent bounce today. We have tested the bottom of the Bianca channels, and for today the 10 day is 6277 and 20 day at 6301. Chinese CPI misseed expectations to print a 6-month low while PPI posted a 44th consecutive month of decline.
US & Asia Overnight from Bloomberg
Asian stocks joined a global selloff amid concern that U.S. policy makers will next month end an unprecedented era of record-low borrowing costs, and as investors awaited a Chinese inflation report. Material and technology shares led declines.
The MSCI Asia Pacific Index dropped 0.4 percent to 133.16 as of 9:00 a.m. in Tokyo as Japan’s Topix index slid from an 11-week high. The Standard & Poor’s 500 Index retreated 1 percent on Monday as investors confronted the increased likelihood the Federal Reserve will boost interest rates this year. For Asian asset managers, the prospect of tighter U.S. policy is compounding concern about the growth outlook as China’s expansion slows. Producer prices in Asia’s biggest economy fell for a 44th month in October and consumer inflation decelerated, according to economist estimates before a report Tuesday.
“In what is now a regular event, global markets sunk overnight and are pricing in the worst of the U.S. and China,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, said in an e-mail to clients. “According to this view, China continues to weaken toward implosion, but not far or fast enough to head off a lift in U.S. rates.”
The Topix fell 0.8 percent in Tokyo, while South Korea’s Kospi index lost 0.5 percent. New Zealand’s S&P NZX 50 Index slid 0.7 percent. Australia’s S&P/ASX 200 Index dropped 1.2 percent. Markets in China and Hong Kong have yet to start trading, while those in Singapore and Malaysia are closed for a holiday.
China Futures
Futures on the FTSE China A50 Index of the nation’s biggest companies dropped 0.8 percent in most recent trading, while contracts on the Hang Seng China Enterprises Index of mainland shares listed in Hong Kong fell 0.9 percent. The Shanghai Composite Index jumped 1.6 percent on Monday to cap a four-day, 10 percent surge.
The OECD trimmed its global economic forecasts for the second time in three months as slower growth in emerging markets spilled over into countries such as Germany and Japan. World output will expand 2.9 percent in 2015 and 3.3 percent in 2016, down from the 3 percent and 3.6 percent predicted in September, the Organization for Economic Cooperation and Development said in a semi-annual report published Monday.
China’s consumer prices probably increased 1.5 percent in October from a year earlier, while factory prices slid 5.9 percent, according to the median estimates in Bloomberg surveys of economists. Export and import figures released at the weekend missed projections.
Futures on the S&P 500 were little changed on Tuesday. The measure’s slump came after U.S. investors shrugged off the threat of higher rates at the end of last week, focusing instead on a blowout jobs report that signaled the economy may be ready to withstand tighter monetary policy. That sentiment was reversed on Monday in the absence of any additional data and after American equities ended last week near their highest level in three months. There’s a 68 percent chance the Fed will move on rates in December, futures trading show. [Bloomberg]
FTSE Outlook
Feeling slightly more bullish today and we have a bullish set up on the 30minute chart just materialising as I write this, so if the 6315 level holds as support we could get a rise to test 6355 and possibly higher. There is a dividend of 11.7 for tomorrow as well, though not massive, it worth remembering. All that said, there is a fairly decent declining 30min channel so the bulls will have a bit of a job to break the 6355 area – we also have resistance here on the 2 hour chart. If they do break it then a rise towards the top of the 10 day Bianca at 6397 is likely. The 10min chart also infers an initial rise this morning with positive moving averages for the bulls and a rising trend line.