Good morning. Sometimes it feels like IG have read my trade plan, as I had the low of 6370 pencilled in as support on Friday and a long order at 6371…. which missed by half a point! Anyway, I know some of you got that manually and that level certainly held well during Fridays session, fuelling a rise back above 6400. The big news over the weekend was Sundays ECB stress tests results. The scenarios simulated how banks would fair if Europe collapsed back into recession, unemployment rose and house prices collapsed. 25 banks failed, mainly Italian and Greek ones, and it flagged up a €25bn (£19.7bn) hole that needs plugging. However, no major banks failed and I expect it will be seen as a positive overall as it eliminates another unknown with regards to the fragility of Europe. The key level today is the top of the 20 day Bianca at 6436, if the bulls can break this then 6495 looks possible; support is 6393 where we have the daily pivot, with 6350 below that.
Asia Overnight from Bloomberg
Asian stocks rose, after the regional benchmark gauge capped its first weekly advance in seven weeks, as a stress test passed by most European banks added to signs of recovery in the region.
The MSCI Asia Pacific Index (MXAP) gained 0.5 percent to 138.22 as of 9:01 a.m. in Tokyo, the highest intraday level since Oct. 10, before markets opened in Hong Kong and China. The gauge last week surged 2.9 percent after U.S. earnings beat estimates and a measure of European manufacturing unexpectedly showed expansion this month.
None of Europe’s largest banks were found lacking in the European Central Bank study. Smaller lenders found to be deficient now have as many as nine months to fill gaps identified by the ECB, which is aiming to close the door on half a decade of financial turmoil in the euro region.
“Most people expect markets to grind out some further gains,” Donald Williams, a Sydney-based chief investment officer who helps oversee about A$1.6 billion ($1.4 billion) at Platypus Asset Management Ltd., said by phone. “The authorities in Europe have chucked so much at the problem and will continue to flood the market with liquidity. The major issue of Europe of the past few years is old news now.”
Japan’s Topix index rose 0.6 percent and Australia’s S&P/ASX 200 Index gained 0.5 percent. South Korea’s Kospi index advanced 0.5 percent. Markets in New Zealand are closed for a holiday. Futures on the Standard & Poor’s 500 Index added 0.1 percent after the underlying gauge surged 4.1 percent last week.
About 79 percent of S&P 500 companies that have reported quarterly earnings this season have topped analysts’ estimates for profit, while 61 percent beat sales projections, data compiled by Bloomberg show. Caterpillar Inc. and Yahoo! Inc. surged last week after posting better-than-expected third-quarter revenue.
China Growth
China’s economic growth will slow to 7.3 percent in 2015, Song Guoqing, an academic member of the monetary policy advisory committee for the People’s Bank of China, said at a forum in Beijing on Oct. 25. That view contrasts with a prediction by Fan Jianping, chief economist at a state research institute, for 7 percent growth next year unless the central government imposes stronger-than-expected stimulus measures. [From here]
FTSE Outlook
As mentioned above the key level initially is 6436 which the bulls will be keen to break, fuelled by relief that no major banks failed the stress tests., with 6460 the next resistance above that. Initially I have put in a rise to that 6436 level before a dip back to test the 6410 area, before another rise. I wouldn’t be surprised if today was bullish and the bulls will be keen to push on before the US opens. They might well be aiming for 6495 by lunchtime. On the flip side and its not bullish, despite the current moving averages on the 10min and 30min being bullish, the first support if todays pivot at 6393, with 6384 and 6354 below that. A long off the pivot with a stop just below the 6384 could well be good if the bulls push from that area instead. The S&P moving averages on daily are just rolling over to bullish, but I wouldn’t rule out a dip to test the 1947 level soon, to spring a rise from (dipping to test the moving averages).