Good morning, hope you had a good weekend. The Ukraine situation continues to weigh on indices whilst the tech stock correction continues as well, dragging the Nasdaq down further. Its quite firmly risk off at the moment (just the right time for a bounce usually!) though we are below the 10 and 20 day Bianca channels, and on the 20 day Raff at 6500ish so if its going to bounce this morning might be a good spot. Might be a bit of a dead cat bounce though as i think we are most likely heading lower towards the summer. On the weekly chart there is support at 6473 (my 2014 outlook that I did back in december had a dip to 6200, possibly 6000, pencilled in for the early summer/late spring) and can be read here. While the “world” situation is a bit up in the air with regards to the tech stock correction and the main one Russia/Ukraine/NATO etc then the backdrop for trading is even more challenging than usual!
Asia Overnight from Bloomberg
Asia’s benchmark stock index swung between gains and losses as raw-material companies declined and Sharp Corp. slumped, while consumer shares advanced.
The MSCI Asia Pacific Index was little changed at 137.81 as of 11:22 a.m. in Hong Kong, having swung gains and losses of 0.2 percent. It declined 1 percent last week. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent, indicating the U.S. equities benchmark index will extend last week’s biggest slide since June 2012 in which the gauge erased its gains for the year.
“Our view remains that a 10 to 15 percent correction in shares is to be expected at some point along the way this year,” said Shane Oliver, who helps oversee about $130 billion as Sydney-based head of investment strategy at AMP Capital Investors Ltd. “But it would be just a correction in a still rising trend. Any such dip should be seen as a buying opportunity.”
Hong Kong’s Hang Seng Index (HSI) retreated 0.1 percent and the Hang Seng ChinaEnterprises Index of mainland shares listed in the city lost 0.5 percent. Singapore’s Straits Times Index rose 0.4 percent and Taiwan’s Taiex Index slid 0.6 percent.
Indicators suggesting China’s economy expanded in the first quarter at the slowest pace since 2009 have spurred speculation the People’s Bank of China will cut banks’ reserve requirements for the first time in almost two years. PBOC Governor Zhou Xiaochuan said officials “don’t have to roll out significant policies” when growth is within normal ranges.
U.S. Rout
Citigroup Inc. (C) is due to report earnings today after JPMorgan Chase & Co. declined 7.5 percent in the week through April 11, the most since May 2012, as profit declined. The Nasdaq Composite Index last week capped its worst week since 2012 amid concern valuations have climbed too high as earnings season starts.
The MSCI Asia Pacific Index last week traded at 12 times estimated earnings, compared with 15.5 for the S&P 500 and 14.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
FTSE Outlook
As mentioned above I wouldn’t be surprised if we see a bounce initially, though its most likely to be of the dead cat variety rather than a relief rally on anything sustainable. I think today will play out simply as a rise then dip and the dip to continue for a while as short the rally mode kicks in. Gold continues to climb well now its pulled away from the 1300 area (finally!) and should be on course for 1500 at some point this year. That will see considerably weaker indices as fundamentally the issues that caused the credit crisis haven’t really gone away (over leveraged debt in most cases) so if there was to be a credit crisis 2 its going to be even worse.
Anyway, for today, looking at the 30 minute chart the if this initial 6520 area holds then we could get a climb to the resistance at 6572. With the daily pivot at 6580 i think the FTSE will be hard pressed to push above that (especially as if it does reach that it will have put on 50 points whilst the underlying backdrop is pretty weak). With the current weakness around I expect us to break 6500 soon and the next supports are 6490 and 6420.