Good morning. Not too bad yesterday with some longs that actually worked out, though the bulls field to break the 6630 area. But the bears couldn’t break 6550 either. After the volatile start to the week everyone was just catching their breath probably! Now the yuan devaluation has passed, there is a chance for the bulls, though they might be a little cautious in light of possible rate rises next month. Certainly going to be interesting to see if rates are increased in September in the US.
US & Asia Overnight from Bloomberg
Asian stocks fluctuated, with the regional benchmark index headed for a fourth weekly decline, as investors weighed an increase in China’s yuan reference rate and a slide in energy shares on a drop in oil.
The MSCI Asia Pacific Index fell less than 0.1 percent to 138.35 as of 10:14 a.m. in Hong Kong after rising as much as 0.2 percent. The gauge is heading for a 1.9 percent retreat this week. The People’s Bank of China’s fixing strengthened after slides of at least 1.1 percent in each of the last three days. U.S. retail sales added to signs the world’s largest economy is strengthening, and raised expectations the Federal Reserve may raise rates next month.
“As yuan concerns dissipate, there’s probably room for a short-term rebound in the markets,” Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees about $118 billion said by phone. “It’s hard to imagine sustainable gains given the prospects of the Fed raising rates next month.”
Chinese equities climbed after the fixing, while the freely traded offshore yuan advanced 0.6 percent, trimming its weekly loss to 3.5 percent. The onshore spot rate was little changed at 6.3993 per dollar.
The Shanghai Composite Index rose 0.7 percent. The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong advanced 0.2 percent, as did the city’s benchmark Hang Seng Index.
Energy shares led losses among the 10 industry groups on the regional benchmark index. Crude headed for a seventh weekly drop, the longest run of declines since January, amid signs the global glut that’s driven prices to the lowest in six years will be prolonged.
Japan’s Topix index was little changed, heading for its first weekly decline in three weeks. Singapore’s Straits Times Index climbed 0.7 percent. Australia’s S&P/ASX 200 Index was little changed. New Zealand’s NZX 50 Index rose 0.3 percent. Taiwan’s Taiex index fell less than 0.1 percent.
Futures on the Standard & Poor’s 500 Index were little changed. The underlying index slipped 0.1 percent on Thursday. [Ref]
FTSE Outlook
Pivot is initial resistance today at 6583 and it will be interesting to see if there are any bears waiting there – above this then I expect the top of that 30min channel to be tested, with resistance at 6600. Support from that channel is 6530, though yesterdays low at 6550 is likely to offer some support, at least initially. The 10min moving averages are pointing to an initial rise, whilst the 30mins are bearish still, having stayed that way since 2pm yesterday, with the bulls failing to break 6630. Usual Friday weirdness expected today really after a volatile week, so might just rocket up to 6600 from the off! The daily chart has support around 6540 and the bottom of the Bianca 10 day at 6517 might give the bulls a bit of support if the bears manage to drop it that low. Its all been fairly news driven this week with the Chinese yuan devaluation (twice!) so bulls might be a little hesitant at the moment. They could probably do with some help so I am looking for the news flow to turn bit more positive shortly – usually get a run of 2 weeks bearish news, then the first positive ones start coming through. There is a bit of US news out at 3pm so will be watching that with interest. Delaying US rate rises would certainly help push the US indices up. I am still feeling a little bit more bullish than bearish – the bears had the perfect scenario early this week to drive it down to 6400 or lower, and the FTSE has actually remained fairly resilient. I have plotted the arrows to 6530, but we might only get down to 6550 on any dips.