Good morning. My bullish sentiment was a bit early yesterday as we ended up with another dip and rise day, thanks to the US pulling things up in the afternoon, despite slightly weaker than expected manufacturing data in the NY region. The bears were not able to break 6500 in the end and overnight prices have held up well. “U.S. data were a little softer than people had hoped and that suggests there is increasing nervousness on whether the U.S. is strong enough to pull the global economy,” said John Haynes, head of research at Investec Wealth & Investment. “We’re going to get fluctuations, but the U.S. will come through the current less-wonderful patch pretty well.” “Investors are going to look at Wednesday minutes of the most recent Fed meeting to see how they’re going to react to the recent yuan devaluation and further decline in oil prices,” said Patrick Spencer, equities vice chairman at Robert W. Baird & Co. in London.
US & Asia Overnight from Bloomberg
Most Asian stocks advanced, with the regional benchmark index holding near a seven-month low, following gains in U.S. equities as strong homebuilder data added to signs the world’s biggest economy is improving.
The MSCI Asia-Pacific Index fell 0.1 percent to 137.73 as of 9:05 a.m. in Tokyo with about three stocks gaining for every two that fell. The Standard & Poor’s 500 climbed climbed 0.5 percent on Monday, reversing earlier losses, after confidence among U.S. homebuilders jumped to the highest level in almost a decade.
“There is a gradual strengthening in the U.S. housing market with positive implications for employment and economic growth if sustained,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $22 billion, said by e-mail. “While the market reaction to the yuan’s depreciation last week was completely overdone, it will be equally unproductive for investors to believe that the currency’s depreciation will reduce China’s macro risk.”
Japan’s Topix index was little changed, swinging between gains and losses. South Korea’s Kospi index rose 0.5 percent. Australia’s S&P/ASX 200 Index slid 0.2 percent. New Zealand’s NZX 50 Index rose 0.1 percent. Markets in China and Hong Kong have yet to open.
The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong slipped 0.9 percent to an eight-month low on Monday as foreigners pulled funds amid concern the outlook for the yuan and economic growth have weakened.
Selling China
Net outflows from Chinese and Hong Kong equities reached $531 million in the week to Aug. 12, the ninth week of selling in the past 10, China International Capital Corp. said.
China may reduce the reserve requirement ratio at banks, the China Securities Journal reported, citing unidentified analysts.
Futures on the Standard & Poor’s 500 Index gained less than 0.1 percent. The underlying measure advanced on Monday as investors await further clues from the Federal Reserve on the path for interest rates.
The Fed releases minutes from its July meeting on Wednesday. Traders see a 46 percent chance of a September rate increase, according to futures trading data compiled by Bloomberg. [Ref]
FTSE Outlook
Most Asian stocks advanced which has support the FTSE overnight. The daily pivot is 6559 so support there initially. If we have another weak day then a dip down to the 6473 area where we have the bottom of the 20 day Bianca looks likely. If the pivot holds (and I’ve gone for this scenario with the arrows) then we could be on for 6600 today (6613 is the top of the 10 day Bianca too). Might just repeat the pattern we have had every day with the morning weakness, then brought back up by the US in the afternoon. Still don’t think they will be raising rates in September myself but we shall see. At the time of writing the 30min EMAs are bullish, though the 10 min has juts gone bearish, so we should get a dip initially, down to the pivot area or just below. August is always a funny month, this one being no exception!