Good morning. I hope you had a good weekend. The FTSE stayed relatively flat around 7035 while we had the bank holiday and the US also being closed for Memorial day on Monday meant that the 2 main headlines I saw didn’t have too much of an effect. The first one was Greece warning that they won’t be able to pay the 1.6bn on 5th June, which isn’t much of a surprise really (and the cynic in me suggests that they are just putting that out there to help the negotiating position), whilst the other was a fairly bearish article from Stephen King of HSBC with the message being that the world authorities have run out of ammunition as rates remain stuck at zero and hey have no margin for error as economy falters. Today Goldmans are warnign about debt piles – Andrew Wilson, head of Europe, Middle East and Africa (EMEA), said growing debt piles around the world posed one of the biggest threats to the global economy. “There is too much debt and this represents a risk to economies. Consequently, there is a clear need to generate growth to work that debt off but, as demographics change, new ways of thinking at a policy level are required to do this,” he said. So some bearish things appearing, which should mean that we pop a little bit higher first before dropping. Still watching for that 2140ish level on S&P!
US & Asia Overnight from Bloomberg
Asia’s regional benchmark stock gauge headed for the first decline in four days, with South Korean shares slipping as the market reopened from a holiday. Healthcare and consumer companies led declines.
The MSCI Asia Pacific Index retreated 0.1 percent to 153.73 as of 9:06 a.m. in Tokyo. The dollar-denominated measure added 0.7 percent over the past three days. Investors await a report on U.S. durable goods Tuesday after last week’s reading on inflation was stronger than expected, bringing the Federal Reserve a step closer to raising interest rates.
“The central scenario still points to a September liftoff” for U.S. rates, Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand Ltd., wrote in a note to clients. “We look set to enter a heightened period of sensitivity. Higher rates will be a good thing; the challenge is to ensure, or be satisfied, there is enough in the fundamentals to ensure equities don’t freak out.”
Singapore’s economy expanded an annualized 3.2 percent in the first quarter, according to a final government estimate. That was faster than the preliminary reading of 1.1 percent.
South Korea’s Kospi index fell 0.2 percent. Markets in Hong Kong, which was also shut Monday, are yet to open. Japan’s Topix index added 0.1 percent. Australia’s S&P/ASX 200 Index advanced 0.2 percent while New Zealand’s NZX 50 Index fell 0.1 percent.
China Rally
China’s CSI 300 Index rallied above the 5,000 level yesterday for the first time in seven years amid speculation the government will accelerate measures to bolster the economy.
E-mini futures on the Standard & Poor’s 500 Index fell 0.2 percent from their close on Friday. Markets in the U.S. were shut on Monday for Memorial Day.
Greek officials will use Tuesday to revive their bid to access financial aid with their finance minister, Yanis Varoufakis, blaming creditors’ insistence on more austerity for the impasse.
While Greek Prime Minister Alexis Tsipras’s spokesman Gabriel Sakellaridis said Monday that a deal can be reached by the end of May, he admitted that disagreements remain in areas such as budget targets, sales-tax rates, pension and labor market rules. [Ref]
FTSE Outlook and Prediction
Todays pivot is 7038 and the area we have been hovering around since Friday. Last Fridays trades worked out well though the short took a long time to deliver those 20 points! Anyway, looking at the 30minute chart I am expecting us to have an initial dip and we have support at 7023 to start with, 200ema on 30min, then 7004 where we have better longer term support on the daily chart. This area and slightly higher, 7011, is also showing as support on the 30min. If 7004 breaks though then the bottom of the 10 day Bianca channel at 6959 is more than likely to come into play. Fridays high at 7065 is resistance above the pivot, and also the top of the 10 day Bianca channel at 7071 (and 20 day not far above that at 7080) means this level could be a bit of a tough one for the bulls to break. I have put a dip, rise to there then a further dip for todays prediction, though after a 3 day break it could be a little more choppy than that. Above the 7080 resistance level then 7113 and 7132 are in play, the latter being the top of the 10 day Raff. I don’t think we will get that high today and the main levels I am watching at 7004 and 7071.