Good morning. Here we are then, 1st December already. Will we get a Santa Rally this year? Which of the banks will get their year end predictions delivered? I think the ones [predicting 7100+ might be a bit far of the mark but you never know! We have some weak Chines manufacturing data overnight which has dragged the FTSE prices down a little, and to be honest I still expect that early December might see a little dip anyway. Looking at the S&P again, I think a test of the daily 25ema at 2041 now is possible, before a year end rally. Oil continues to fall, dropping below $70 a barrel, cynically I’m thinking that its another measure designed to hurt Russia.
Asia Overnight from Bloomberg
Asian stocks fell with U.S. index futures as a Chinese manufacturing gauge dropped, American holiday spending slowed and oil tumbled to a five-year low. Malaysia’s ringgit headed for the biggest two-day retreat since 1998 and precious metals slumped.
The MSCI Asia Pacific Index (MXAP) fell 0.9 percent by 2:20 p.m. in Tokyo, with Standard & Poor’s 500 Index futures dropping 0.4 percent. West Texas Intermediate crude lost 2.4 percent to $64.59 a barrel, sending Australian energy stocks toward the biggest three-day loss since the global financial crisis. Gold sank as Swiss voters rejected a measure to force the central bank to hold bullion. The Bloomberg-JPMorgan Asia Dollar Index fell to a four-year low as the ringgit weakened 1.5 percent.
Collapsing oil prices are damping inflation expectations and pushing global commodity indexes to multi-year lows. U.S. consumers cut spending by an estimated 11 percent over the post-Thanksgiving weekend. China’s official factory index fell to 50.3 for November, below the 50.5 reading projected by economists, while a private gauge from HSBC Holdings Plc and Markit Economics came in at 50, the border between expansion and contraction.
“Concerns about disinflation and deflation are being fueled by what we’re seeing in energy and commodity markets at this point in time,” Richard Gibbs, global head of economics at Macquarie Group Ltd., Australia’s largest investment bank, said in a Bloomberg TV interview in Sydney. “Clearly the decision by the Saudis to not even countenance a cut in production has strong geopolitical undertones.”
‘Shock Therapy’
Saudi Arabia, the biggest oil exporter among the Organization of Petroleum Exporting Countries, was a driving force behind the 12-member group’s decision last week to hold production steady. The oil minister of Iran, which advocated for an output cut, said in an interview late last week that the “shock therapy” of a steep decline in prices is no solution to OPEC’s loss of market share to U.S. shale producers. Brent crude fell 2.6 percent today to $68.34 a barrel, a four-year low.
U.S. equity-index futures signaled a second day of decline for the S&P 500 as a surge in Thanksgiving Day holiday sales failed to carry through the Black Friday weekend. Contracts on the Dow Jones Industrial Average and Nasdaq 100 Index slipped at least 0.3 percent.
Gains by consumer stocks such as Wal-Mart Stores Inc. and Target Corp. on Nov. 28 tempered the biggest one-day rout in energy stocks in three years.
Consumer spending fell to $50.9 billion over the four Days through Nov. 30, down from $57.4 billion in 2013, the National Retail Federation said today in a statement. It’s the second year in a row that sales declined during the period, which had long been famous for long lines and frenzied crowds.
Asian Equities
Eight of the 10 industry groups on the Asia-Pacific stock gauge fell today, led by energy and materials producers. Airlines had the biggest gains today.
Hong Kong’s Hang Seng Index retreated 1.7 percent and a gauge of Chinese shares in the city slipped 1.3 percent. The Shanghai Composite Index climbed 0.9 percent for an eighth day of gains even as offshore investors briefly became net sellers of mainland Chinese shares through the connection with Hong Kong.
Australia’s S&P/ASX 200 (AS51) Index slid 2 percent, with a subindex that includes oil companies tumbling 6.4 percent today. The energy gauge is down more than 15 percent in the last three sessions, it’s largest drop since October 2008. Materials and energy stocks make up about 20 percent of the benchmark measure.
Commodity Currencies
The Australian dollar weakened 0.6 percent to 84.53 U.S. cents and the country’s 10-year government bond yield dropped below 3 percent for the first time since October 2012. The Markit iTraxx Australia index of credit-default swaps gained 1.5basis points to 92 basis points as of 11:31 a.m. in Sydney, Citigroup prices showed.
The Bloomberg Dollar Spot Index was little changed after rising to its highest level since March 2009. Norway’s krone, the worst-performing major currency against the U.S. dollar this quarter, slipped 0.1 percent, South Africa’s rand retreated 0.4 percent and Canada’s dollar declined 0.1 percent.
Japan’s yen fell to a seven-year low of 119.03 per dollar today. That boosted shares of exporters like Toyota Motor Corp. and camera maker Canon Inc., propelling the Topix index to a 0.5 percent advance.
The ringgit led losses in emerging markets today, falling to 3.4353 per dollar, according to data compiled by Bloomberg. It earlier reached 3.4392, the weakest since February 2010. The crude-exporting country’s currency has dropped 2.7 percent in two days, the biggest such decline since June 1998.
Optimism ‘Difficult’
The Asian Dollar Index dropped 0.1 percent to 113.47, the lowest level since Sept. 20, 2010. South Korea’s won slipped 0.5 percent. Indonesia’s rupiah weakened 0.6 percent as a HSBC manufacturing gauge fell to 48 last month, the lowest level since the measure was introduced in 2011.
Copper fell to a four-year low as a rout in the energy market drove raw materials lower. The metal for delivery in three months tumbled as much as 1.9 percent to $6,230.75 a metric ton on the London Metal Exchange before trading at $6,266.
“The substantial adjustment to oil prices continues to be a drag on other commodities,” said Hou Jun, a Shenzhen-based strategist at Citic Futures Co., a unit of China’s biggest listed brokerage. “It’s difficult to be optimistic on commodities going into 2015 as policy differentiation continues to support the dollar in a low inflation environment while growth outside the U.S. remains under pressure.”
Gold for immediate delivery fell as much as 2.1 percent to $1,142.88 an ounce, the lowest level since Nov. 7, before trading at $1,152.33. Silver lost as much as 6.7 percent.
A proposal that would have required the Swiss National Bank to hold at least 20 percent of its assets in bullion was voted down by 77 percent to 23 percent in a referendum yesterday. [ref]
FTSE Outlook
Today pivot is at 6708 and I am expecting a bit of a weaker day today, despite it being the start of a new month. I think there will be an initial rise first thing as the new monthly money flows in, but then a dip down to 6675. I have plotted a possible overshoot on that drop to the bottom of that declining 30 minute channel though I am thinking that the 6675 area will hold. The 10 day raff channel is now heading down, and we are breaking below the Bianca channels having repeatedly tested the bottom of those channels most of last week. We are also within a declining 10 minute channel, hence my bias for an initial dip this morning. I have put the long in the trade plan as per the solid arrows, but just bear i9n mind the dotted ones for a possible play of that 6675 support level breaks.