Good morning, hope you had a good weekend. Fridays little long worked out well with the dip to the order level and then a bounce which I took 20 from (always nice to get a winner on a Friday!), though it did manage to rise to 6695 in the end. Not much of a dip going into the weekend which was a little surprising with the risk of the Ukraine situation escalating, unless it is still just being media hyped (always a possibility) and the people that need to know what is going on aren’t actually that worried.
Fairly quiet on the news front over the weekend (excluding Premiership title race football matches!) with the US pushing for tougher Russian sanctions over the Ukraine situation and the detention of foreigners.
Asia Overnight from Bloomberg
Asian stocks fell for a third day, with the regional benchmark index heading for a two-week low, as investors weigh corporate earnings and prospects Russia will be subject to new sanctions as tensions over Ukraine intensify.
The MSCI Asia Pacific Index lost 0.4 percent to 137.68 as of 12:30 p.m. in Tokyo, with seven of 10 industry groups falling. The gauge dropped 0.7 percent last week after Chinese manufacturing data signaled persisting weakness in the world’s second-largest economy. The U.S. and European Union will impose new sanctions on Russia as soon as today as the crisis in Ukraine escalates amid the detention of international observers by pro-Russian separatists.
“We expect the market to consolidate in the next couple of months,” Audrey Goh, Singapore-based investment strategist at Standard Chartered Plc, said by phone. “The Ukraine crisis will cause volatility in the market. Softening earnings is another area of concern for investors.”
Representatives of the 28 European Union nations will meet today to widen a list of people subject to asset freezes and travel bans, an official from the bloc said over the weekend. The sanctions will target 15 Russians in positions of power, another diplomat said. Both asked not to be identified because of the sensitivity of the matter.
“The Ukrainian tensions are once again mounting,” Evan Lucas, a Melbourne-based markets strategist with IG Ltd., said in an e-mail to clients. “This will mean that Asia is starting the week on the back foot.
Profit at Chinese industrial companies rose 10.1 percent in the first quarter from a year earlier, according to a report from the country’s statistics bureau released yesterday. China’s official manufacturing purchasing managers’ index, due May 1, is expected to come in at 50.5 for April, up from 50.3 for March, according to a Bloomberg survey of economists. Readings above 50 signal expansion.
The MSCI Asia Pacific Index traded at 12.6 times estimated earnings as of April 25 compared with 15.9 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.
Futures on the S&P 500 swung between gains and losses. The U.S. benchmark gauge slipped 0.8 percent on April 25, while the technology-heavy Nasdaq Composite Index dropped 1.8 percent amid concern earnings growth is too slow to justify valuations.
The Ukraine situation continues to weigh on peoples minds with a “will it won’t it escalate” outlook, though the absence of a dip on Friday as people took profit and reduced exposure ahead of the weekend suggests that traders are waiting for something concrete to be know. Going for the Donald Rumsfeld outlook I expect “known unknowns”!
Todays pivot is 6682 so we have support there and below that at Fridays low of 6656. The bottom of the Bianca 10 day channel is also possibly looming into play, being 6623. The climb of gold through the 1300 level suggests there is a little bit of a flight to safety (its bounced well from that 1271 area mentioned on previous emails) going on. On the bigger picture looking at the daily trends the FTSE still looks pretty positive with a potential push to the 6800 area. Resistance today is once again at 6711 and 6736 – the top of the Bianca 20 day channel.
On the 30 minute chart we have a pretty clear rising channel the bottom of which is not too far below the daily pivot. As such, if that holds then we should get a rise to the 6711 area, possibly the 6730 area after that. With Fridays strength and the main news out today being US pending home sales, we could get a bit more of a rise. If the 6656 level were to break though then it will get bearish, with a dip to 6623 then 6550 and 6515 as supports below that.