Good morning. Both shorts yesterday worked out, though the first not as well as hoped. The bulls came out as the price hit 6420ish and we got a pretty fast climb, but then no break of the 6480 area (second shorting opportunity). That said, we are back testing that level and things are actually looking a little more hopeful for the bulls, especially if the Dow holds this current level. Twitter results were out last night, an initial share price rise of 6% was quickly reversed to a 13% drop. The joys of tech stocks! User numbers levelling off and a whopping Q4 loss spooked investors. Eyes will definitely be drawn to NFP tomorrow as the next major news item to see where next for stocks.
Asia Overnight from Bloomberg
Asian stocks advanced for a second day while Australia’s currency climbed after the nation reported a surprise trade surplus on exports to China. Commodities gained, with silver, gas and nickel rising.
The MSCI Asia Pacific Index added 0.3 percent by 3:15 p.m. in Tokyo, as Australia’s S&P/ASX 200 Index snapped a three-day losing streak. Standard & Poor’s 500 Index futures rose 0.2 percent after the gauge slipped a third time in four days in New York. Australia’s dollar strengthened 0.6 percent versus the greenback. The S&P GSCI Spot Index of 24 commodities rose 0.3 percent as silver added 0.6 percent, gas rebounded 3.8 percent and nickel advanced 0.7 percent in London.
Stocks are rising after $3 trillion was wiped from equities worldwide this year amid a selloff in emerging-market currencies on cuts to U.S. Federal Reserve stimulus. Australia reported an unexpected trade surplus of A$468 million ($420 million) in December as two-way trade with China hit a record. The European Central Bank and Bank of England decide on monetary policy, while investors await data on U.S. jobless claims today before payroll and unemployment reports tomorrow.
“China is Australia’s biggest trading partner for its iron-ore and coal exports and the two countries are intertwined with each other,” said Nagayuki Yamagishi, senior analyst at Money Square Japan Inc. “The increase in exports to China is very positive for the economy. That eases recent concerns over emerging markets and can support the recovery in global growth.”
U.S. Economy
U.S. unemployment is forecast to have held at 6.7 percent in January, according to economists surveyed by Bloomberg ahead of a monthly jobs report tomorrow. Companies in the U.S. boosted payrolls by 175,000 in January, according to data from ADP Research Institute. Payrolls rose 74,000 in December, missing the median analyst projection for an increase of 197,000
“Markets overall will be in a holding pattern until we see U.S. nonfarm payroll data on Friday,” said Tim Schroeders, a portfolio manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Emerging markets and the rate of U.S. growth are two things people need to get their heads around.”
Philadelphia Fed President Charles Plosser, who votes on policy this year, said he expects the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering to bond purchases by the central bank. Policy makers made the first two cuts to asset purchases in December and January, slowing to $65 billion a month from $85 billion.
FTSE Outlook
Today’s pivot is 6455 and there is quite a high chance of that being hit this morning before a bounce. The bulls tried to break it out upwards yesterday by breaking 6480, then got smacked down to 6444 (this was 3pm). I wonder if that was a sign of things to come and the bulls were just a bit too quick out the blocks. Interestingly yesterday the Dow and S&P stayed relatively stable while the Nasdaq dropped a bit more – maybe brining everything into line for a bounce. As a slightly bigger picture, I think the FTSE could reach 6600 on any bounce before declining again to 6200 or lower (following the weekly chart below).
For today it does look bullish, and has held up overnight; there is a 10 minute channel in play with resistance at 6495 initially and support at 6470ish. Should that break upwards then 6515 and 6580 look likely targets (top of the 20 Raff channel is 6580). We are testing the top of the 10 day Bianca channel as I write this at 6483. I think that we will get a generally bullish day (especially if 15440 holds on the Dow, next support on Dow after that is 15360 though). There is a fairly decent channel on the 30 minute chart as well, the top of which we are currently testing; support is 6445.