Good morning I hope you had a good weekend. The bulls tried hard to break the 6400 level last week but its proved quite strong resistance, and the top of the 10 day Bianca is sitting at 6434 for today, so any breach might be capped there. The China wobble is all but forgotten about for the moment as Q3 GDP beat estimates offsetting last weeks disappointing CPI and PPI figures (from China) which kept alive the concerns about the economy slowing down. Its still eyes on the Fed for interest rates decisions as poor inflation data from Western countries will delay interest rises in the US and the UK, and Canada and the ECB could be on the way to additional loosening of its monetary policies. I still think it will be next year till rates rise in the US. UK news over the weekend is starting to get more Euro focussed in advance of the referendum, whilst UK consumer confidence climbed to its highest level in at least four years in the third quarter, as low inflation and rising pay packets saw households shrug-off this summer’s market turmoil.
US & Asia Overnight from Bloomberg
Asian stocks pared losses, Treasuries erased gains and the currencies of Australia and South Korea strengthened after China reported third-quarter economic growth that beat estimates.
The Shanghai Composite Index rose to a two-month high as the better-than-estimated 6.9 percent expansion in gross domestic product, while still being slowest pace since the global financial crisis, signaled the China’s stimulus policies may be taking hold. The MSCI Asia Pacific Index pared its drop. South Korea’s won rose to its strongest since July, while the Aussie reversed earlier losses. Gold retreated and Treasuries were little changed after rising with the yen and euro before the data.
“Sentiment is positive on hopes for some more stimulus as the growth number beats the estimate but it’s still less than the government target,” said Yen Chiu, a Hong Kong-based trader at Shenwan Hongyuan Group Co. “The market won’t be as volatile as before with investors’ confidence on the mend.”
Stocks
The MSCI Asia Pacific Index lost 0.2 percent by 1:01 p.m. in Tokyo, slipping from its highest level since Aug. 20. The Topix index fell 0.3 percent, paring a drop of as much as 1.1 percent, while the Kospi index in Seoul slid 0.2 percent. Australia’s S&P/ASX 200 Index fluctuated.
Hong Kong’s Hang Seng Index was little changed with the Hang Seng China Enterprises Index, a gauge of mainland Chinese stocks listed in the city. The Shanghai Composite added 0.5 percent. Economists had projected GDP growth of 6.8 percent.
Futures on the Standard & Poor’s 500 Index dropped 0.2 percent to 2,021.75, after the U.S. benchmark ended Friday at an eight-week high, capping a weekly advance of 0.9 percent.
“Although there is a lot of skepticism about official releases, markets will continue to follow closely the numbers to get an idea on how far the government is willing to let the deceleration go,” Barclays Plc analysts, including Andres Jaime, a currency and rates strategist in New York, wrote in a client note, referring to Monday’s data out of China. “We see some downside risks for emerging-market currencies in case data disappoint or there are more signs of financial instability in the Chinese markets in the weeks to come.”
Commodities
Gold for immediate delivery slipped 0.4 percent to $1,172.58 per ounce after increasing 1.8 percent last week. Monday’s decline follows a private report on Friday that showed U.S. consumer sentiment rose more than forecast this month and government data Thursday that showed jobless claims unexpectedly slid to match the fewest in four decades. [Bloomberg]
FTSE Outlook
There appears to be fairly decent support at the 6340/6350 area this morning to start with, so with bearish moving averages to start the day I think we will get an initial dip to this area. The bulls will be keen to break the 6400 level which capped the rises last week, though with the daily channel top at 6434, and the top of the 30 minute rising channel at 6421 they might not be able to push too far past it. As such I think that a rise to this level could well be worth a short. If it gets really bearish early this week then there is daily support down at 6278 for the bottom of the 20 day Raff, and the bottom of the 10 day Bianca at 6276. Good area currently for a swing long. If the bears do break the 6340 support area this morning then this area looks likely. Just looking at the Dow though, I think it could push a bit higher towards 17250/350 today. Generally feeling a bit more bullish for today, certainly to start with so buy the dips down to 6350ish.