Good morning. It was shame that the morning session only reached a high of 6312 and missed the 6320 level at that time, as it dropped back down from there, before rising to the 6320 in the afternoon. Not ideal on a Fed day during the US session, and of course that short failed. Bullish reaction to the Fed in the evening saw a rise to 6400 (pretty close to the 6420 resistance in the end as the high 6410 in the early hours). If that 6150 on Tuesday is the low then that is 2 years running the Santa Rally has started on the 16th December. The slight spanner in the works is that this rise being quite quick has pushed above the 10 day daily channels – both Raff and Bianca, so a dip back to get within them is possible today/tomorrow. That said, the 25ema on daily is 6503 so we may still see that level first. Dax is nearly testing its 25ema on daily at 9673. The 25ema is often resistance.
Asia Overnight from Bloomberg
Asian stocks climbed, with the regional benchmark index rebounding from an almost nine-month low, after a Federal Reserve pledge to be patient on interest-rate increases sent U.S. equities up the most since 2013. Precious metals advanced and oil swung between gains and losses.
The MSCI Asia Pacific Index advanced 0.8 percent by 2:06 p.m. in Tokyo, as Hong Kong’s Hang Seng Index (HSI) climbed from its lowest since May and Japan’s Topix index headed for its biggest gain in a month. Standard & Poor’s 500 Index futures slipped 0.1 percent after the U.S. gauge jumped 2 percent, erasing about half of its December drop. Crude oil traded at $56.41 a barrel in New York. South Korea’s won fell 0.7 percent versus the dollar and China’s yuan was at the weakest since July. Gold climbed 0.6 percent.
The Fed said it will be patient when it comes to the timing of rate increases, replacing a pledge to keep borrowing costs near zero for a “considerable time,” and raising its assessment of the job market. While falling unemployment is pushing the U.S. toward higher borrowing costs, plunging oil prices are holding inflation below target. Russian President Vladimir Putin holds a media conference amid the ruble’s slump.
“Asian markets will be comforted by the rise in the U.S.,” Angus Gluskie, managing director at White Funds Management in Sydney where he oversees about $550 million, said by phone. “But it doesn’t really alter the fundamentals, which are growth in the U.S. is good and the sharp drop in the oil price and Russian currency are still likely to destabilize markets.”
Sony Gains
The MSCI Asia Pacific Index closed at the lowest since March 31 yesterday, having lost 5 percent since the end of November. BHP Billiton Ltd. (BHP), the world’s biggest miner and Australia’s No. 1 oil producer, was the biggest drag on the measure through that period as plunging crude prices dragged a Bloomberg gauge of global commodities to five-year low on Dec. 16. BHP added 1.9 percent today.
The Topix rebounded 2 percent from its lowest level since Oct. 31 and the Nikkei 225 Stock Average rallied 2.2 percent.
Sony Corp. climbed 4.3 percent in Japan after its movie production unit, Sony Pictures, canceled plans to release “The Interview” on Dec. 25 amid pressure from cyberterrorists who broke into the company’s computers and threatened violence against filmgoers. The movie is about a plot to assassinate North Korean leader Kim Jong Un.
Australia’s S&P/ASX 200 Index increased 1 percent, while the NZX 50 Index (NZSE50FG)added 0.4 percent in Wellington. South Korea’s Kospi index slid 0.8 percent.
The Hang Seng Index, which entered a correction this week having fallen more than 10 percent from a recent high, added 1.2 percent today. A gauge of Chinese stocks in the city climbed 1 percent as property prices fell in 67 of 70 Chinese cities in November, improving from 69 in October.
China Rates
The Shanghai Composite Index retreated 0.3 percent today, slipping from a four-year closing high, as the biggest new share sales of the year sapped funds from the market and drove China’s benchmark money-market rate to the highest level in almost nine months.
The seven-day repurchase rate, a gauge of interbank funding availability in the banking system, climbed 99 basis points to 4.88 percent as of 11:21 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the biggest jump since January. The similar-term borrowing rate on the Shanghai Stock Exchange jumped 260 basis points to 12.85 percent.
U.S. Rally
Yesterday the S&P 500 made up about 40 percent of the ground it lost since touching a record 2,075.37 on Dec. 5. The index jumped back above 2,000 and its 50-day moving average of 2,002.89, levels that when breached Dec. 15 led to amplified selling. Yesterday’s gain — it closed at 2,012.89 — boosted the gauge’s 2014 return to 8.9 percent. The S&P 500 was down almost 5 percent in December as of Dec. 16.
The Dow Jones Industrial Average increased 1.7 percent, while the Russell 2000 Index (RTY) of small-cap shares jumped 3.1 percent, the most since Dec. 20, 2011.
The U.S. consumer-price index dropped 0.3 percent in November from the previous month, the most since December 2008, after being little changed the prior month, a Labor Department report showed yesterday. The retreat was led by a plunge in fuel costs, with WTI oil down 42 percent this year amid concern over waning demand and a global glut in the commodity.
Persistently low inflation allows Fed policy makers to take a wait-and-see approach to raising key borrowing costs, while plunging fuel costs free up money for households to spend on other goods and services, firming the economic expansion. Yields on 10-year Treasury notes were little changed at 2.14 percent after rising eight basis points in New York.
Won, Yuan
South Korea’s won slipped for a second day, sinking to 1,104.50 per dollar as the yen climbed 0.2 percent to 118.46 per dollar. The greenback surged as much as 2.1 percent versus Japan’s currency last session as the Bloomberg Dollar Spot Index jumped 0.9 percent, the most since October.
China’s yuan weakened 0.25 percent to 6.2129 per dollar as of 12:56 p.m. in Shanghai, according to China Foreign Exchange Trade System prices, the weakest level since July 3. The People’s Bank of China cut the yuan’s reference rate for the yuan by 0.09 percent, the most since Nov. 6, to 6.1195 per dollar. The central bank has raised the fixing 0.24 percent this month even as the greenback gained.
Gold bullion for immediate delivery advanced to $1,197.81, according to Bloomberg generic pricing. The metal fell yesterday to $1,183.89, the lowest since Dec. 1. Silver gained 1.6 percent and platinum added 1 percent.
Rupiah, Oil
The Indonesian rupiah climbed 0.8 percent, the most since Oct. 29, to 12,560 per dollar. India’s rupee added 0.6 percent to 63.2725, set to snap a three-day losing streak.
West Texas Intermediate for January delivery was little changed in electronic trading on the New York Mercantile Exchange. The U.S. benchmark contract, which expires tomorrow, climbed 54 cents to $56.47 yesterday. The more-active February future climbed 14 cents to $56.93 today. Prices have decreased 43 percent this year, set for the biggest annual slide since 2008.
Brent for February settlement was 17 cents higher at $61.35 a barrel on the London-based ICE Futures Europe exchange. It increased 2 percent yesterday.
Forward contracts on Russia’s ruble slipped 0.3 percent, paring losses of as much as 6.7 percent. The currency finished trading yesterday at 60.2205 per dollar in Moscow, 11 percent higher after the country’s finance ministry said it was selling foreign exchange. Only Ukraine’s hryvnia has fallen more than the ruble’s 45 percent plunge against the U.S. dollar this year.
FTSE Outlook
It would appear that Santa has arrived for the moment, though it won’t just be a straight line up till the end of the month. Resistance is still at 6420, with 6503 and 6538 above this. However, whilst we now have a fairly decent rising PRT channel on the 30minute chart, there is a declining one with resistance at 6412 – tallying with the out of hours high as well. As such I wouldn’t be surprised if we get a dip from there down to the pivot level at 6312, before more bull. As mentioned above, I do think that we will be testing the 25ema on the daily soon, 6503 for today, however, the top the 20 day Raff is 6488 so resistance there. Might be a good plan to add a half stakes short at 6488, then another half at 6503 to fade in and ride a possible swing short from there. We have quite wide levels currently, but support is 6312 where we have the daily pivot, with 6305 below this. A break of that would probably see 6250, so can be worth a run down if the support breaks. I think that 6305 area will hold though.