Good morning. Well we had 2 decent bounces off the 6915 area in the end, but the third test broke through as it often does, dragged down by the US weakening on poor data once again.The bulls stepped in a bit at 6890 towards the end of the day and managed to get the price up to 6920 by the time the US closed. Of course, in case you hadn’t noticed(!), today is election day so the market will be watching the exit polls to try and glean some advanced knowledge. I expect its going to be very close again, but either way it might be tricky to trade today! The S&P long at 2080 got going for a very short while but then collapsed to test the bottom of the 10 day Raff in the end at the 2069 area – a level that saw a better bounce. All looks bearish to start the day on the FTSE.
US & Asia Overnight from Bloomberg
Asian stocks and bonds retreated, extending a global rout, as Japan returned from a three-day holiday. Oil slipped after reaching its highest this year and metals fell with emerging currencies.
All major Asian stock gauges dropped by 2:25 p.m. in Tokyo, with Chinese shares sliding after Morgan Stanley ended its overweight call. The yield on 10-year Japanese bonds jumped seven basis points and the Topix index slid 0.8 percent. Standard & Poor’s 500 Index futures were little changed. U.S. crude traded at $60.61. Emerging currencies weakened versus the dollar as Vietnam devalued its dong for the second time this year. Gold dropped 0.4 percent and nickel lost 1.2 percent.
About $2 trillion has been wiped from the value of global equities and bonds since the start of last week amid signs of price stabilization in Europe, speculation over U.S. interest rates and concern China’s share market is overheated. Federal Reserve Chair Janet Yellen said Wednesday that she sees potential danger in the rich valuations of both debt and stocks. Investors are waiting on U.S. employment reports Friday for clues to the strength of the world’s largest economy.
“Risk-off moves could intensify if the U.S. economic situation is deemed weak,” Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo, said by phone. “Sentiment could sour even more depending on the April payrolls report. The U.S. economy was expected to bottom out in March and recover in the second quarter, but so far the figures for April have been poor.”
Data Disappoints
Productivity in the U.S. fell in the first quarter, data Wednesday showed, while a private payrolls report showed companies added the fewest number of workers in more than a year last month. The Bloomberg ECO U.S. Surprise Index is at levels last seen during the financial crisis in 2009.
Ten-year Japanese yields climbed to 0.43 percent, set for their highest close since March as the market catches up with the past three days of global trading. Rates on similar maturity Treasuries were little changed at 2.23 percent after surging 21 basis points through Wednesday from the end of April.
Australian 10-year rates rose eight basis points to 3 percent, with their eight-day climb matching the longest streak since February 2011. Rates on similar New Zealand notes advanced for a 14th day.
The Hang Seng China Enterprises Index, a gauge of mainland Chinese shares listed in Hong Kong, fell 1.4 percent before trade data Friday that may show imports declined for a sixth straight month in April. The Shanghai Composite Index slumped 2.1 percent, taking its three-day retreat to 7.5 percent.
China Stocks
The Kospi index in Seoul fell 0.8 percent amid selling by foreign investors, while New Zealand’s NZX 50 Index lost 0.6 percent.
Australia’s S&P/ASX 200 Index lost 0.8 percent, bringing its three-day slump to 3.1 percent. The Australian dollar climbed 0.3 percent to 79.91 U.S. cents.
West Texas Intermediate crude rose to as high as $62.58 a barrel Wednesday, the highest level since December, before paring its advance to end the session up 0.9 percent. Brent oil dropped 0.8 percent to $67.25 a barrel Thursday following two days of gains.
U.S. crude stockpiles fell by 3.88 million barrels last week, according to the Energy Information Administration. Analysts surveyed by Bloomberg had predicted an increase in supplies. Refineries operated at the highest rate in four months as imports slipped to a one-year low.
Won, Ringgit
South Korea’s won dropped 0.9 percent to 1,089.75 per dollar, and Malaysia’s ringgit slipped 0.6 percent to 3.5905 to the greenback. Indonesia’s rupiah, Turkey’s lira and the Philippines peso weakened at least 0.2 percent.
Gold for immediate delivery slipped to $1,187.86 an ounce, while silver dropped 0.4 percent. Platinum and palladium both fell 0.3 percent.
Nickel for three-month delivery on the London Metal Exchange dropped 1.3 percent, taking its two-day loss to 3.5 percent, the most since March.
The pound was little changed at $1.5249 following two days of gains. Polls suggest that neither Conservative Prime Minister David Cameron nor his Labour Party opponent Ed Miliband will come close in Thursday’s election to getting enough seats in Parliament to govern alone. Instead, they may face days or even weeks of talks to try to win over enough smaller parties to command a majority. [Ref]
FTSE Outlook
Tough one to call today but as the moving averages are bearish to start the day I am going to go with an initial dip and then a rise. We also have a declining 30minute channel with support at 6865ish, and resistance at 6962. However, the daily pivot at 6926 might keep the lid on any rises, at least at first. We have Non Farm Payrolls in the US tomorrow, so if yesterdays job data from the US is any sort of guide we might get a weaker result, which could cap any rises today. If the bulls do manage to break the pivot then the 200ema on the 30min at 6963 is the next resistance, with 6990 above that, where we have the top of the 10 day Bianca, and the 25ema on the daily – which would be the first touch since crossing to bear and worth a short from. Above this then 7044 and 7082 are the next levels though I doubt we will push that high on election day, unless it becomes clear that the Conservatives are looking like gaining a majority. Support wise, the main levels to watch are 6879, 6866 and 6851 – this latter one looks worth a long as its the bottom of the 10 day Bianca, and also a PRT daily channel, if that 30minute channel breaks. That said, it does all look quite bearish at the moment, and the S&P daily EMAs are also crossing to bearish now, somewhat invalidating the chance 2140.
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