Good morning. A bit of an odd day yesterday that saw the FTSE moving around quite viciously, from seemingly random areas, such as support at 6463 late in the day. After the initial drop as expected from the pivot area, we found support at 6520 as expected and all seemed to be going to plan. Good news came out, and it broke support and dropped to 6480, bad news came out and it climbed to 6530. Tapering fears surfaced and it dropped to 6463, then various rumours started circulating about US debt deals and such like and it climbed. Certainly not an easy day to trade once the US came online! I mentioned back in October and November that I wasn’t ruling out a dip after the decent run up over the summer and then a rise at the end of the year and it seems like that has in fact been the case, though it did look doubtful for a while. I had pencilled in a dip to 6400 then a rise to end the year somewhat optimistically at 6800. We are certainly testing the bottom of the various daily channels at the moment, as have the Dax and S&P as you can see on the Raff charts below.
Asia Overnight from Bloomberg
Asian stocks dropped, dragging the benchmark index to a three-week low, while Australian bonds declined and gold retreated. Indian equities rallied with the rupee amid state elections.
The MSCI Asia Pacific Index dropped 0.4 percent by 3:12 p.m. in Tokyo. Standard & Poor’s 500 Index futures were little changed. Australia’s S&P/ASX 200 Index (AS51) tumbled 1.4 percent, while 10-year yields climbed nine basis points. India’s S&P BSE Sensex advanced 1.7 percent as the rupee appreciated 0.7 percent. The yen climbed 0.2 percent. Gold fell 0.4 percent.
U.S. payrolls data tomorrow may help investors gauge the outlook for stimulus, after a private report yesterday showed American companies added more jobs than analysts predicted last month. The European Central Bank and Bank of England hold policy meetings today, while Federal Reserve officials meet on Dec. 17-18. An exit poll showed India’s main opposition party is set to win four of five state elections before a national vote.
“As people digest the potential impact of the tapering, we’re likely to see softer share markets in the weeks ahead,” Angus Gluskie, who helps oversee about $550 million as a fund manager at White Funds Management in Sydney, said by phone. “If you’re still positive on the longer-term economic outlook, there could be buying opportunities. We’re still in a reasonable environment to hold equities.”
U.S. Data
Ten-year Treasury yields were little changed at 2.83 percent, after climbing five basis points yesterday to the highest close since Sept. 17.
Growth in manufacturing, technology and housing kept the U.S. economy expanding at a “modest to moderate” pace through mid-November, the Fed said in its Beige Book survey released yesterday. U.S. companies added 215,000 jobs in November, according to an ADP Research Institute report released yesterday, more than the 170,000 predicted in a Bloomberg survey of economists and the biggest increase in a year.
Data today are projected to show initial claims for unemployment benefits in the U.S. climbed to 322,000 in the week to Nov. 30, after unexpectedly dropping to a two-month low in October. Annualized growth in the world’s biggest economy probably accelerated to 3.1 percent in the third quarter, the most since the first three months of 2012, according to a Bloomberg survey of economists.
Employers added 185,000 workers to nonfarm payrolls last month after they increased by 204,000 in October, data tomorrow will show, according to the median estimate in a Bloomberg survey of 85 economists.
FTSE Outlook
After a fairly dismal start to December, though not totally unexpected really, I expect that we will still end the year fairly positively. Just as you can’t pick the “top” exactly, so you can’t pick the “bottom” either and as such somewhere around this 6450/6500 area would probably be about right rather than trying to pinpoint a figure. I have support at 6480 today and a dip to that would tally with those dip and rises mentioned for the Dax and S&P above. If 6480 were to break then 6445 still looks likely as support. If 6480 is tested and holds then we could get a decent bounce starting to form, with 6530, 6570 and 6630 all viable targets. 6480 is the bottom of the 10 day Bianca channel for today.
It might be a bit premature after the fairly large falls this week but as long as 6480 holds then bulls could reappear.