Good morning, here we are at the start of another month. usually bullish as new money flows into funds so will it be today? Just missed the long yesterday at 6711, with the drop stopping at 6718 which was a tad annoying, however the bounce from there shows there is still a bit of strength remaining, even with the 6750 breaking. We still have the bottom of the 10 day Bianca channel at 6740 so if that holds we could get a bounce to 6790 before further declines. The 20 day Bianca channel bottom is also at 6732 so double support here, though with the dip from 6810 the bears are slowly waking up. On the news front September saw the largest unsecured borrowing in the UK raising fears of another debt bubble, whilst the ECB is warned it must take immediate and pre-emptive action to head off the risk of full-blown deflation by next year. All key measures of eurozone inflation fell dramatically in October, leaving the region dangerously close to a Japan-style deflation trap. Consumer price inflation (CPI) plunged from 1.1pc to 0.7pc, the lowest since the financial crash in 2008-2009. “This is a massive downward surprise,” said Gizem Kara from BNP Paribas. A string of debt-crippled states are now sliding into deflation, with Italy buckling over the late summer. The underlying rate is even lower once austerity-linked tax rises are stripped out
Asia Overnight from Bloomberg
Asian stocks fell, with the regional benchmark index paring its weekly advance, as speculation the Federal Reserve will reduce stimulus in coming months overshadowed improving China manufacturing data.
The MSCI Asia Pacific Index slid 0.5 percent to 141.66 as of 12:03 p.m. in Hong Kong, as all 10 industry groups retreated. More than two shares declined for each that rose. The measure is poised for a 0.2 percent advance since Oct. 25 and climbed 2.7 percent in October for its first back-to-back monthly rally since April.
This is “the start of a phase of consolidation that should last a few weeks,” Michael Bogoevski, head of sales trading at CMC Markets in Sydney, said in an e-mail. “There is the likelihood that the Fed is looking to cut back on its bond-buying program in the coming weeks or months, not in March as previously forecast.”
U.S. data yesterday showed the biggest jump in a gauge of business activity in more than three decades and a drop in jobless claims, before a report today projected to show American factory output expanded. Chinese manufacturing grew in October at a faster pace than the previous month, according to an official report today.
Futures on the S&P 500 rose 0.1 percent today. The equity gauge yesterday slipped 0.4 percent on speculation the Fed will scale back stimulus in coming months as investors assessed earnings.
I am expecting a rise then dip today, mainly as we are opening near the bottom of the shorter Bianca channels and we had a decent bounce off the 6720 area yesterday. The bulls might struggle to break 6790 though. The key for some early morning growth will be holding above 6740, and I am expecting an open around 6750. On the news front later today we have the US ISM manufacturing figure, forecast at 55.1 versus 56.2 previously. The shutdown last month might have a bearing on the actual figure. Not much out on the UK news front, though house prices rose again last month, which is probably what fuelled that jump in credit card borrowing – a bit of feel good factor and a bit of extra spending. Been here before though haven’t we, 2007 cough cough!