Good morning. A fairly quiet weekend on the financial news front overall. Still some simmering tensions over the Ukraine and a plane crash (some say a bearish sign!?). Fridays NFP results came in better than expected, creating a sell off – an improvement stoking tapering fears again. Overnight last night we had slightly weaker Chinese inflation data as prices decline.
Asia Overnight from Bloomberg
Asian stocks tumbled, led by shares in Hong Kong and Shanghai, copper headed for its biggest two-day retreat since May and emerging-market currencies fell as weaker-than-estimated Chinese trade and inflation data stoked concern over the outlook for the world’s second-largest economy.
The MSCI Asia Pacific Index dropped 1 percent by 1:16 p.m. in Tokyo, as the Hang Seng Index fell 1.6 percent. Copper slid 1 percent, heading for its lowest close since June and leading industrial metals lower.
Standard & Poor’s 500 Index futures lost 0.3 percent. China’s yuan weakened as the central bank lowered its fixing by the most since July 2012 versus the dollar. Malaysia’s ringgit snapped a four-day gain and Australia’s currency declined. Gold decreased 0.5 percent.
Industrial metals are falling as expanding stockpiles in China, the biggest consumer, add to a raft of data that signify a broad slowdown. The country’s lawmakers are meeting to set economic policy amid growing credit risks that saw the country’s first onshore bond default last week. Better-than-estimated U.S. payrolls figures on March 7 bolstered the case for continued reductions in Federal Reserve stimulus. In Crimea, Russian troops detained Ukrainian border guards amid the ongoing standoff.
“China is moderating but only very modestly,” said Donna Kwok, Hong Kong-based senior China economist at UBS AG., in a Bloomberg TV interview. “Ultimately you need to wait for March data to really get a true sense of the underlying outlook. The PBOC is very consciously guiding the recent volatility. We see the default as a risk, as a shift in investors’ mindset.”
Inflation Report
Producer prices slid 2 percent, the most since July, while the inflation rate was 2 percent for February, reports at the weekend showed. The National People’s Congress, an annual meeting of China’s lawmakers, continues this week, with People’s Bank of China Governor Zhou Xiaochuanspeaking tomorrow.
USA
U.S. 10-year Treasuries climbed, snapping a four-day losing streak, with the yield dropping to 2.77 percent today. Economists projected U.S. payrolls would rise by 149,000 last month, with the bigger-than-expected 175,000-worker increase indicating the economy is starting to bounce back from frigid winter weather.
“The fact employment rebounded in February despite the harsh weather pretty much guarantees the Fed will continue with its steady process of tapering by $10 billion at its next meeting,” Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., wrote in an e-mail to clients today, referring to the Federal Reserve and its bond-buying program.
FTSE Outlook
I am thinking a dip and rise today and we have both the 10 and 20 day Bianca channels nearly in play – the 20 day at 6707 and the 10 day at 6668. Today’s pivot is 6739 so likely to act as initial resistance for any rises. To regain any sort of strength for the foreseeable future the price will; need to exceed 6805 which is the top of the 10 day Bianca channel.
In addition to the bottom of the 10 day Bianca at 6668 we also have the bottom of the 20 day Raff at 6670’ish and therefore I think if 6705 breaks this morning, we will dip to that sort of level before a decent bounce, though how long that bounce might last remains to be seen!
I have plotted an initial small bounce from the 6705 area, really only because we have the 20 day Bianca channel there, but I don’t think it will be the bottom for today. If we do hold support at the 6670 though then the bulls will be aiming for the pivot and possibly higher at 6765.
If these supports start to break then we could well be petty bearish for a while, so start shorting on any breaks below 6670.