Good morning, well we have hit the 6750 overnight, after Fridays slow drift up. Once again its eyes on stimulus measures as Fridays consumer confidence figure was weaker than forecast – thus giving hope for extended QE. Not to blow my own trumpet but I have said since they first mentioned tapering that it wouldn’t be till 2014 at the earliest, and I still think that is the case. All the weekend news was dominated by “the great storm” and the likely travel chaos this morning. The US phone tapping story continues, and they won’t be happy that’s out in the public domain at all! Anyway, the 10 day Bianca channel continues to hold and with the bottom at 6720 and the top at 6778 its still pretty narrow, but dips to the channel bottom being bought is still the preferred play for the moment.
Asia Overnight from Bloomberg
The MSCI Asia Pacific Index gained 0.7 percent to 142.32 as of 12:29 p.m. in Tokyo, with all 10 industry groups on the gauge rising. Investors are awaiting industrial production data today from the world’s largest economy, the next barometer for clues as to whether the Federal Reserve will delay scaling back U.S. monetary stimulus.
“We are in a liquidity-fueled stock boom,” Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion, said in an e-mail. “Rising valuations have never stopped overheating markets, so the market rise could be extended, as long as central-bank stimulus remains in place.”
The MSCI Asia Pacific Index fell 1.5 percent last week, curbing its October gain to 2 percent, with the measure on course for a second monthly increase. That pushed its price-earnings multiple to 13.6 times estimated profit on Oct. 25 from 12.7 at the end of August, according to data compiled by Bloomberg. That compares with 15.9 for the S&P 500 and 14.8 for the Stoxx Europe 600 Index.
China Bets
Chinese brokerages are betting the biggest jump in money-market rates since June’s record cash crunch is a sign of strength in the nation’s economy rather than finance-industry weakness. The central bank has refrained from injecting funds into the banking system since Oct. 17, driving the benchmark seven-day repurchase rate 138 basis points higher to 4.88 percent last week, the most in four months.
S&P Futures
S&P 500 Index futures rose 0.4 percent today. U.S. stocks completed a third straight week of gains on Oct. 25, sending the S&P 500 to a record, as earnings beat estimates and weak economic data fueled speculation the Fed will delay reducing stimulus. Consumer confidence in the U.S. dropped to a 10-month low, a private report showed Oct. 25.
A two-day meeting at the Federal Open Market Committee will start tomorrow after U.S payrolls rose less than projected last month and the 16-day government shutdown took at least $24 billion out of the economy.
The Fed is likely to delay lowering its $85 billion in monthly bond purchases until March, according to a Bloomberg News survey of economists conducted Oct. 17-18.
FTSE Outlook
Nothing really bearish around at the moment and still experiencing the slow drift up, and will do till the next area of resistance at 6778 I feel which is the top of the 10 day Bianca channel. With the bottom of the channel at 6721 then movement below that will get the bears interested again. I am still cautiously bullish as I was for the back end of last week, and bearing in mind that this rally is mostly being driven by hope of delayed tapering. However, trade what you see, and at the moment the trend is up. Today’s pivot is 6717 so another reason that a long at 6720ish should bear fruit. Its worth noting that on the daily chart we have a big ProTrend channel, with the top at 6804 and the bottom at the 6470 area. So bear these bigger picture figures in mind too. I have gone for a somewhat optimistic start today, mainly as the EMAs are pretty positive and I expect the 6730 area to hold initially. However, if it drops a bit further at the start, towards the pivot/support area at 6720 then the first trade will be the long. If it all goes pear shaped initially for the bulls then 6698 has support if 6720 breaks. If 6668 breaks then I won’t be cautiously bullish anymore, but outright bear!