Good morning. The sad news that about another Malaysian 777 helped the shorts late on yesterday, having been shot down by the rebels – the the bears broke the 6723 support area which had held earlier in the day. It looks like we will gets dip down to 6686 today initially, and possibly have a decent bounce there. Bear in mind it is Friday and not always that sane though, especially with all the geopolitical going ons at the moment with Ukraine, Israel etc.
Asia Overnight from Bloomberg
Asian stocks fell from near a six-year high, the cost of insuring regional debt jumped the most in four months and government bonds rallied on rising geopolitical tension. Malaysian Airline System Bhd. shares dropped with the ringgit after one of its planes was shot down in Ukraine.
The MSCI Asia Pacific Index slipped 0.5 percent by 12:51 p.m. in Tokyo, falling for the first time this week. Malaysian Airline shares tumbled 8.9 percent and the ringgit weakened 0.3 percent. Standard & Poor’s 500 Index futures fell 0.1 percent after the U.S. gauge’s biggest drop in three months. Ten-year bond yields in Australia and Japan traded near the lowest in more than a year, while a gauge of credit-default swap prices jumped five basis points. Oil in New York added 0.5 percent.
Ten-year U.S. Treasuries jumped the most in since March overnight, leading a rally in haven assets, after Ukraine’s government claimed pro-Russia rebels shot down the passenger jet and as Israel sent ground troops into Gaza. The United Nations Security Council will meet later today on the plane’s downing, which killed 298 people. Chinese developers rallied in Shanghai as new-home prices fell in 55 of 70 cities monitored last month from May, spurring speculation property-market curbs may be loosened.
“There’s geopolitical risk in Ukraine and the Middle East,” said Kim Youngsung, the head of overseas investment in Seoul at South Korea’s Government Employees Pension Service. “People think the stock market won’t be a safe place to invest. They turned to bonds.” The agency invests the equivalent of $3.87 billion.
All 10 industry groups on the Asia-Pacific gauge declined today. The measure yesterday closed near the highest level since June 2008.
Malaysian Airline, which had another plane disappear without trace in March, dropped to 20.5 sen, taking the shares’ losses this year to 34 percent. The ringgit traded at 3.1877 per dollar.
The Boeing Co. 777 was en route to Kuala Lumpur from Amsterdam and crashed in the main battleground of Ukraine’s civil war. The incident is stoking tensions just days after the U.S. said rebels were getting weapons from Russia, and after sanctions against the country were tightened. Airlines began shifting planes away from the region, which sits astride some of the busiest air routes between Europe and Asia.
Ukraine’s state security service said it intercepted phone conversations among militants discussing the missile strike, which knocked Flight 17 from the sky near the eastern town of Torez, about 30 kilometers (18 miles) from the Russian border. Russian President Vladimir Putin said Ukraine’s government bore responsibility for the crash because it wouldn’t have occurred without the current strife.
The Shanghai Stock Exchange Property Index jumped 2.9 percent, the most since April, as developers surged amid speculation that local and provincial governments will do more to arrest sliding property prices.
Prices fell in 55 of the 70 cities last month from May, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the statistics. Prices fell for the second straight month in June, according to SouFun Holdings Ltd., the nation’s biggest real estate website. A decline in May was the first since June 2012.
China’s one-year interest-rate swaps climbed for a fifth day, the longest rising streak since January, amid signs of an economic pickup and on speculation tax payments will drain cash.
The S&P 500 slid 1.2 percent to 1,958.12 yesterday, the biggest one-day drop since April 10, while the Dow Jones Industrial Average declined 0.9 percent. The Chicago Board Options Exchange Volatility Index (VIX) jumped 32 percent, the most since April 2013.
Israel sent soldiers and tanks into Gaza in a ground offensive aimed at stopping the barrage of missiles fired by Hamas and other Palestinian militants after a short-lived cease-fire collapsed earlier in the day.
“There’s been a huge escalation of geopolitical risk,” Douglas Gordon, a Seattle-based investment strategist at Russell Investment Group, which has about $280 billion in assets under management, told Bloomberg TV. “There’s a lot of uncertainty that the market has to digest. Markets are going to be very cautious and we’re going to see some flight towards quality.”
6723 support from yesterday could act as initial resistance and a decline to 6686 initially today looks likely, as the fall out over Ukraine and Israel/Gaza continues. Theres certainly more risk off reasons at the moment! Todays pivot is 6750 so any rise is likely to halt there, if the 6686 area does become a key bounce point today. Below 6686 there is the wider 30 minute channel with 6670 support, the the 6634 bottom of the 20 day Bianca channel. The S&P bounced off the bottom of its 20 day raff channel at 1950 yesterday as well, so there is some bullishness still around.
If the bulls are going to retake control then the price will need to break that 6750 pivot, and probably just above at 6760, which would then open up the possibility of 6807 and 6832 – the top of the 2 Bianca channels.