Good morning. Well that was rather bearish again. Oil continues to drop and is dragging the FTSE down with it. Got a great catch going long at 6532 for a quick bounce and all was going well. For a little while,then it dropped back and had a very bearish evening as the US sold off again too. We are up off the overnight lows now, and didn’t quite reach the 6444 lowest support I had for yesterday. The bottom of the 10 day Bianca today is 6452 (20 day Raff is same area) – will we see that? Quite possibly as we are in a declining 30 minute channel, the Fed are in a blackout period so can’t help, but we do have the ECB releasing their monthly report later at 9am, and US retail sales for November and jobs data at 13:30.
Asia Overnight from Bloomberg
Asian stocks dropped after oil’s collapse to a five-year low triggered the biggest blow to U.S. stocks (SPX) since October. Sovereign bonds followed Treasuries higher while copper and platinum advanced.
The MSCI Asia Pacific Index fell 0.5 percent by 2:46 p.m. in Tokyo, heading for a seven-week low as benchmark gauges in Japan and Hong Kong slipped at least 0.7 percent. Futures on the Standard & Poor’s 500 Index added 0.2 percent after the U.S. measure decreased 1.6 percent. The yen weakened 0.3 percent following its biggest surge in 18 months and Australia’s dollar fluctuated after a jobs report beat estimates. West Texas Intermediate crude rose 0.7 percent after a 4.5 percent plunge. Copper and platinum increased least 0.4 percent.
The yield on 10-year Treasury (USGG10YR) notes fell to 2.17 percent yesterday as tumbling oil prices spurred a selloff from stocks to metals and corporate debt. The Organization of Petroleum Exporting Countries cut the forecast for how much crude it will need to provide in 2015 to the lowest level in 12 years and U.S. crude inventories rose to the highest seasonal level since 1982, the Energy Information Administration said. Oil’s rout is feeding concerns about deflation from Tokyo to Beijing and Brussels amid weakening global growth.
“Given how high the market was and now you have a combination of worries about oil and what’s happening in Greece, this is likely to be just a profit-taking market,” said Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which oversees more than $127 billion. In the longer-term, “you should see falling inflation expectations and at the end of the day, it should have a stimulatory effect globally. Next year is likely to be far more volatile than 2014.”
Asia Stocks
The MSCI Asia Pacific Index (MXAP) is down for a third straight day, with all 10 industry groups retreating. Santos Ltd. (STO) slid 8.3 percent as the Australian oil producer followed U.S. counterparts lower. Santos has dropped 30 percent this month, compared with a 7.8 percent decline for a subindex of energy shares in the Asia-Pacific gauge.
Hong Kong’s Hang Seng Index (HSI) retreated 1.2 percent and a gauge of Chinese shares in the city slid 1.4 percent. China Oilfield Services Ltd. plunged 6.9 percent and Cnooc Ltd., the nation’s biggest offshore oil producer, tumbled 2.7 percent to the least since July 2009. The Shanghai Composite Index declined 1.2 percent after advancing 2.9 percent yesterday.
MSCI All-Country World Index dropped 1.3 percent yesterday for a third day of losses. That was the biggest retreat since Oct. 10 and the lowest level since Oct. 30.
U.S. Losses
WTI traded at $61.37 a barrel after reaching $60.94 yesterday while Brent crude added 0.6 percent to $64.61 after falling below $65 for the first time since 2009.
The S&P 500 has declined 2.4 percent since closing at a record Dec. 5. Energy shares tumbled 3.3 percent to the lowest since April 2013, while oil and gas producers led the slide in European equities and Canadian shares. The gauge has advanced 9.6 percent in 2014, heading for a third year of gains, fueled by better-than-forecast economic data and corporate earnings.
The yen surged yesterday, jumping 1.5 percent to 117.98 per dollar, and capping its biggest three-day gain since August 2013. Japan’s currency rose 0.9 percent to 146.82 per euro yesterday. South Korea’s won was 0.3 percent stronger today after the country’s central bank held rates unchanged for a second month.
The Bloomberg Dollar Spot Index swung between gains and losses as the JPMorgan Global FX Volatility Index held at the highest level since September 2013. Malaysia’s ringgit fell 0.3 percent to 3.4890 against the greenback. Lower oil prices are seen as weighing on the Southeast Asian nation’s exports.
Australian Jobs
The Aussie was little changed at 83.21 U.S. cents. Employment in Australia increased by 42,700 in November, versus an estimate for a gain of 15,000, while the unemployment rate rose to 6.3 percent. October’s job-increase figure was revised down to 13,700.
New Zealand’s dollar weakened 0.2 percent to 77.94 U.S. cents after soaring 1.7 percent into yesterday’s close as the central bank said future interest-rate increases can be expected.
OPEC lowered its projected output for next year by about 300,000 barrels a day to 28.9 million. Prices now are below what 10 of OPEC’s 12 members need for their annual budgets to break even, according to data compiled by Bloomberg, with Kuwait and Qatar the exceptions.
FTSE Outlook
Todays pivot is 6521 so that is initial resistance, though I am expecting yesterday evenings weakness to continue and test the bottom of that 30 minute channel. Which nicely coincides with the bottom of the 10 day Bianca and 20 day Raff. If we break below 6444 then flip to short for a run down to 6380 or lower. if we were to break the pivot then the next resistance is 6640, followed by 6684 where we have the top of the 10 day Bianca. Would have to be a really bullish day to have a hope of getting that high – unlikely unless we have some intervention or oil does an about face. I can see oil settling around $55 a barrel for the next few years… just a hunch. A lot of equity bulls will have been burnt now trying to catch the bottom of this ready for the Santa Rally (if it comes). 72% of IG clients are still long so we should in theory drop bit further to stop out a few more. Until thats below 50% I wouldn’t expect any big bursts upward.