Good morning. I hope you had a good weekend. The main news was that Greece is edging closer to a third bail out deal, while it looks like China will be providing more stimulus as there are a few more flashing warning signs, as exports and factory gate prices collapse in July. China’s producer price index (PPI) fell 5.4pc in the year to July, according to the National Statistics Bureau. This compares with expectations for a 5pc decline and represents the steepest fall since October 2009. Persistent weakness in commodity prices and soft demand in the world’s second largest economy mean factory gate prices have suffered 41 consecutive months of decline. It follows disappointing data on Saturday that showed exports shrank 8.3pc in July compared with a year ago. Analysts had forecast a decline of just 1.5pc. Meanwhile, Greece’s creditors agree on draft deal after marathon talks as Finland’s foreign minister criticises the rescue and inists ‘Grexit’ is still the most likely outcome
US & Asia Overnight from Bloomberg
Asian stocks fell after China reported bigger-than-expected slides in exports and producer prices and U.S. jobs data boosted trader expectations for a Federal Reserve interest-rate increase next month.
The MSCI Asia Pacific Index declined 0.1 percent to 140.89 as of 9:01 a.m. in Tokyo. The gauge has slumped the past three weeks amid efforts by Chinese authorities to stem equity-market declines and as investors analyzed U.S. economic data for clues as to the timing of the first U.S. interest-rate increase since 2006. Traders in interest-rate futures are pricing in a 54 percent probability of a hike next month.
“Share markets are likely to remain volatile in the next few months,” said Shane Oliver, Sydney-based global strategist at AMP Capital Investors Ltd., which oversees about $119 billion. “Uncertainties remain regarding Chinese economic growth and a likely Fed interest-rate hike lies ahead for later this year.”
Japan’s Topix index slid 0.4 percent. South Korea’s Kospi index declined 0.1 percent. Australia’s S&P/ASX 200 Index rose 0.1 percent and New Zealand’s NZX 50 Index was little changed. Markets in Singapore are closed for a holiday.
Data on Friday showed U.S. employers added 215,000 jobs in July and the unemployment rate held at a seven-year low of 5.3 percent. The gain in payrolls followed a 231,000 advance in June that was bigger than previously estimated. While the report also showed a pickup in hours worked, average hourly earnings climbed a less-than-forecast 2.1 percent from a year earlier.
Shipments from China shrank 8.3 percent in July, more than five times the drop projected by analysts, stoking concern over Asia’s largest economy, which is estimated to grow at its slowest pace this year since 1990. Producer prices posted their steepest slump since 2009, data showed Sunday.
Futures on Hong Kong’s Hang Seng and Hang Seng China Enterprises Index fell at least 0.5 percent Friday. Futures on the FTSE China A50 Index lost 0.2 percent, while those on the Shanghai Shenzhen CSI 300 Index added 2.6 percent in most recent trading. [Ref]
FTSE Outlook
As I write this at 6am it looks quite positive with a bounce off Fridays lows managing to hold, helped by the thought of more Chinese stimulus and a tentative Greek bail out deal. We have a pretty decent rising 30 min channel, the bottom of which coincides with the daily pivot at 6735ish, so a long here could be worth a go – and can have a family tight stop as if this breaks then the bottom of the 10 day Bianca at 6716 is the most likely next support (we also have the 200ema on 30min here at 6723). Below this we 6690 on the daily chart for support with the 25ema and the bottom of the 10 day Raff. Generally, I feel that we might see a bounce today (famous last words probably) for a push towards 6760. This level is a fairly key resistance level, which if the bulls can break leads towards 6800+. On the last 2 occasions the bulls have failed to break 6766, so if its tested today then 3rd time is more likely to break. I have put a fairly optimistic plan in place for today, with a couple of longs off the key supports, as the movie averages first thing, on both 10min and 30min are bullish, thus favouring longs…. at the moment at least!