Good morning. Well, Thursday wasn’t quite as bearish as expected then, though Australia dropped off its highs so the FTSE may well follow suit shortly (albeit a small pull back). The big news for Friday is that Germany is expected to approve the new eurozone bail-out deal for Greece in a parliamentary vote but has warned that Athens will receive nothing unless it honours its commitments under the deal. Wolfgang Schaeuble, the German finance minister, said he was “stunned” after his Greek counterpart, Yanis Varoufakis, spoke again of a debt restructuring on Greek radio, and the Athens government indicated it would block plans to privatise strategic assets.
US & Asia Overnight from Bloomberg
(Bloomberg) — Japanese equity-index futures climbed as the dollar held gains versus major peers and emerging-market currency forwards slid, while Australian bonds paced declines in Treasuries. U.S. oil was below $50 a barrel.
Nikkei 225 Stock Average futures were bid up 0.3 percent in the Osaka pre-market as the dollar maintained Thursday’s 0.5 percent advance against the yen and traded near its strongest level since 2003 versus the euro. South Korean won and Malaysian ringgit forwards sank at least 0.8 percent. Futures on the Standard & Poor’s 500 Index were little changed by 8:44 a.m. in Tokyo, with oil in New York at $48.82 a barrel. Yields on Australian 10-year notes climbed six basis points, mirroring an increase in Treasury rates after a report on U.S. prices.
While data Thursday showed oil’s slump drove the broader U.S. consumer price index lower in January, investors seized on a bigger-than-forecast increase in core inflation amid speculation over the timing for rate rises. Federal Reserve Chair Janet Yellen signaled this week inflation and wage growth remain too low to warrant tightening policy. Core price growth expanded less than expected in Japan, a report Friday showed, and U.S. fourth-quarter economic growth may be revised down.
“The U.S. economy appears sound under the hood, with rising core inflation an indication that Fed fund hikes are a matter of when and not if,” Mark Smith, a senior economist at ANZ Bank New Zealand Ltd. in Auckland, wrote in an e-mail to clients. “This keeps the Fed on track to commence its tightening cycle around the middle of the year.”
Dollar Strength
Nikkei 225 futures were bid at 18,850 in the pre-market, from 18,800 at their close in Japan Thursday. Contracts on the Chicago Mercantile Exchange were little changed at 18,865 following a 1.3 percent increase last session. Japanese consumer prices excluding fresh food rose 2.2 percent from a year earlier in January, trailing the 2.3 percent increase estimated by economists and slowing from 2.5 percent in December.
The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major peers, jumped 0.9 percent Thursday, the most since Feb. 6, as the greenback soared 1.5 percent against the euro. The yen was steady at 119.38 per dollar Friday, down 0.3 percent in the week and 1.6 percent in February.
One-month non-deliverable forwards on the won slipped 0.8 percent to 1,104.50 per dollar, while similar contracts on the ringgit sank 0.9 percent to 3.6140 and NDFs on Indonesia’s rupiah retreated 0.4 percent. The Chinese yuan dropped 0.2 percent in offshore trading to 6.2801 a dollar.
Oil Gyrations
Australia’s S&P/ASX 200 Index extended its retreat from an almost seven-year high, falling 0.5 percent as energy producers dropped 0.8 percent. The nation’s 10-year bonds yielded 2.48 percent, with the notes falling for the first time in four days. Rates on similar maturity Treasuries climbed to 2.03 percent in New York.
WTI crude for April delivery gained back some ground in early trading, rising 1.4 percent after tumbling 5.5 percent on Thursday. WTI’s discount to Brent crude widened to the most in 13 months after report Wednesday showed U.S. crude supplies rose to 434.1 million barrels last week, the highest level in weekly estimates from the Energy Information Administration beginning in 1982.
Both grades sank about 50 percent in 2014 amid signs of a global glut in the commodity and as Saudi Arabia led a decision in November by the Organization of Petroleum Exporting Countries to maintain the group’s output.[Ref]
FTSE Outlook
Well it all looks pretty bullish really! The top of the 10 day Bianca is 6978 for today, with support at 6933 – if this lower level breaks then 6900 and 6890 are the next supports to look for, with good support showing on the daily chart at 6860 – 25ema here and the bottom of the 20 day Raff. Its dropped of its highs a little overnight, though yesterdays high at 6958 is resistance initially, with the 6978 above that. If it starts to outperform then the 20 day at 6998 is likely. Really for today I am thinking of trying a long at the daily pivot 6931, and see what it does, cut quickly if it breaks, then try again at the 6890.