Good morning. Well that was a rather annoying stop out yesterday at 6836 as it sure enough did bounce to target at 6870 after all. I know a few held as had lower stops so that was good, at least some of us benefitted from the bounce! Still, at least the 6875 short came good, closing fully at 6840.
Yesterday, the World Bank cut its global growth forecast amid weaker outlooks for the U.S., Russia and China, while calling on emerging markets to strengthen their economies before the Federal Reserve raises interest rates.
The FTSE closed slightly above it open yesterday, whilst the Dax, once it climbed to the 10030 area, stayed pretty flat for most of the day. The S&P levelled off around 1950 and also didn’t really do much. Pausing for breath or turning over? With the absence of any dip off 6870 yesterday I think we may see a push higher before another dip – opposite to yesterday really.
Asia Overnight from Bloomberg
The euro fell against most peers and Australian bonds followed Treasuries lower before a sale of 10-year U.S. notes. Japanese stocks rose, with the Asian benchmark equity gauge near a one-year high, and nickel fell.
The euro weakened 0.1 percent versus the dollar by 2:12 p.m. in Tokyo, falling against 15 of 16 major peers. The yield on 10-year Australian notes climbed seven basis points after the rate on equivalent U.S. Treasuries hit a four-week high. Japan’s Topix added 0.6 percent as the MSCI Asia Pacific Index extended its highest close since May 21 last year. Standard & Poor’s 500 Index futures fell 0.1 percent. Nickel slid 0.6 percent and platinum retreated 0.4 percent.
U.S. 10-year yields rose before the sale of $21 billion of the securities today, boosting the allure of the dollar as European Central Bank cuts rates to stave off deflation. The World Bank cut its global growth forecast to 2.8 percent, citing weaker outlooks for the U.S., Russia and China. MSCI said it’s no longer considering reclassifying South Korea and Taiwan as developed markets and won’t induct mainland China-listed shares to its emerging-markets gauge.
“The latest comments from ECB policy makers imply they are biased towards easing and remain cautious about the impact of the euro’s strength on inflation,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities in Tokyo. “The euro is likely to break below $1.35 as we continue to see U.S. yields higher as a recovery in the U.S. economy continues.”
World Bank
The euro bought $1.3522, the least since it fell to as low as $1.3503 on June 5, the cheapest level since Feb. 6. The joint currency fell 0.3 percent, a fourth straight decline, to 138.30 yen. The currencies of Norway, Denmark and Switzerland also slid against the greenback.
New Zealand’s dollar advanced against all major currencies, adding 0.3 percent versus the dollar and 0.4 percent to the euro. The South Pacific country’s central bank will lift the official cash rate to 3.25 percent tomorrow, according to 13 of 15 economists surveyed by Bloomberg.
The World Bank’s forecast for 2014 was reduced from a January prediction of 3.2 percent, with the projection for U.S. growth cut to 2.1 percent, from 2.8 percent while China’s was lowered to 7.6 percent from 7.7 percent. The economy of Japan, Asia’s second-largest, will probably expand 1.3 percent this year, reduced from a previous forecast of 1.4 percent growth. The euro area’s 1.1 percent projection was left unchanged.
Japan’s Topix (TPX) rose after dropping 0.5 percent yesterday, the steepest one-day decline since May 19. Hong Kong’s Hang Seng Index slipped 0.4 percent after yesterday erasing its decline for the year. A gauge of Chinese companies listed in the city retreated 0.2 percent and the Shanghai Composite Index dropped 0.3 percent.
U.S. Stocks
Yields on 10-year U.S. Treasuries rose one basis point to 2.65 percent after climbing four basis points to the highest close since May 12 in New York. Data yesterday showed U.S. job openings and wholesale inventories topped economists’ forecasts.
The S&P 500 was little changed at 1,950.79 after closing at a record the previous four days, pushing its valuation to 16.5 times projected earnings, the highest multiple in four years.
“This is a temporary reprieve from a market that’s been seeing highs,” Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees $160 billion, from Florham Park, New Jersey, said by phone. “It shouldn’t be a shock to anyone that we’re seeing softness after a blistering recovery.”
FTSE Outlook
Despite the pause in the climb to new highs, we have crossed back to above the daily pivot which is 6861 today (not that far below where we are as I write this). As such that could be initial support and the absence of bears at 6870 resistance yesterday makes me think that we might try for 6900, if the bulls can break the 6880 level which seems to be holding them back at the moment. Below 6861 we have support at 6825. Bit frustrating to get stopped out on that long yesterday but nature of the beast.
We have the Bianca channel tops at 6893 and 6896 today, slowly creeping up each day, so that area should be worth a short, later on if we get that high.
So, today I am thinking an initial rise to that 30 minute channel and the glass ceiling area at 6880, dip to the pivot at 6861, then a rise to 6900ish. Might tally with the Dax hitting 10070 and S&P hitting 1956.