Good morning, well that made a change (and a pleasant one) for a Friday to turn out so well with the drop from 6860 (which was Januarys high in case you wondered where that level came from). Most of the news over the weekend was about the ongoing Ukraine situation which is still pretty fluid and could cause a bit of tension still between Russia and the US. We also had the G20 meeting ongoing in Sydney, were a further $2trillion has been pledged to underpin global economies – long live QE! Finance ministers and central bankers said they would take concrete action to increase investment, boost employment and promote competition in a joint communiqué following a two-day G20 meeting in Sydney. The group accounts for around 85pc of the global economy. “We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2pc above the trajectory implied by current policies over the coming five years,” the statement said. “This is over $2tn more in real terms and will lead to significant additional jobs.” From here
Asia Overnight from Bloomberg
Asian shares dropped, metals fell and the yen climbed after a Chinese state-owned newspaper said some banks curbed loans to developers. Natural gas climbed to its highest price in five years as forecasts for frigid weather in the U.S. bolster the energy-demand outlook.
Gauges of Chinese shares in the mainland and Hong Kong tumbled more than 2.1 percent at 2:44 p.m. in Tokyo and the yuan extended its biggest weekly drop in two years. The MSCI Asia Pacific Index fell 0.6 percent and Standard & Poor’s 500 Index (SPX) futures slipped 0.1 percent. Copper retreated the most in a month, silver decreased 0.6 percent and the yen strengthened against all major peers. Gas futures rose to $6.35 per million British thermal units, set for the highest close since 2008, ahead of a forecast arctic blast this week.
“Tighter lending policies in China will obviously be extrapolated as a negative in the short-term,” said George Boubouras, who helps oversee A$32 billion ($28.7 billion) as chief investment officer at Equity Trustees Ltd. in Melbourne. “If the authorities are trying to make sure that there’s better quality credit growth in the next cycle, that’s ultimately better for global growth.”
More than two stocks fell for each that advanced on the MSCI Asia Pacific Index. The measure is down 3.4 percent this year amid concern that slower growth and a crackdown on risky lending practices in China will dent the earnings outlook for the region’s companies.
“Property prices are at a high level now and the industry may enter a correction period,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Given the fact that the property industry is a pillar of China’s economy, growth will lose steam once the industry suffers. That’s also bad for global growth.”
Natural gas rose as much as 5.6 percent. Hedge funds increased bullish bets on the heating fuel as inventories dropped to the lowest in a decade. West Texas Intermediate crude gained from the lowest price in a week, advancing as much as 0.5 percent in New York. Brent gained in London.
“After a mild and pleasant weekend for many, winter will make a harsh return to much of the central and eastern U.S.,” the National Weather Service said in a report yesterday. The agency warned of possible record cold temperatures this week in the High Plains, Upper Midwest and Great Lakes areas.
FTSE Outlook
After Fridays dip we are nearing the bottom of the 30 minute channel and also the 10 day Bianca at 6805. Should it overshoot then 6783 is a good place for a long I feel, being the bottom of that channel on the 30min. We also have the 20ema there which often acts as support. As such the main trade today is a long from this area. On the upside, Fridays high is the resistance level that the bulls will need to break and if they do so then 6883 and 6900 (top of the 30min channel mentioned above) as well as 6904 being the top of the 10 day channel likely resistance. Out of the 3 indices analysed above, the FTSE is the one that still looks strongest in terms of the daily channels as the 10 day is still heading up quite steeply. Recently the 10 day Raff channel has been working well, and I would hope that remains the case today if prices dip to the 6780 area.
I have put an initial dip in down to that support area, mainly as a continuation of Fridays slide, fairly weak overnight and the 30 minute EMAs being bearish still. I do expect the bulls to retest at 6860 level again and think we could well see 6900 early this week. I am not getting out and out bullish yet unless the FTSE closes above 6940 as we have the top of the Bianca channels getting closer around 6904/6923.