Good morning. What a day yesterday, when the price hit the 6642 area I mentioned and thought it was a short it all looked pretty risky after a strong climb at the open. Oh what a false prophecy that was! My 6615 short first thing got stopped (which was fortunately quite tight so minimal damage) but was just a bit early shorting there. We then had some serious drops getting as low as 6488 out of hours yesterday. It all felt quite risky placing the trades at the time but that short and the later long paid off, just a bit gutting I closed the short when I did! C’est la vie! Of course most of the movement yesterday was down to the Fed as I am sure you know, who have cut QE by a further $10 billion per month. no real surprises there, and one could argue that by tapering they have faith in the recovery and economic strength. It has sent emerging markets into a tailspin though!
Asia Overnight from Bloomberg
Asian stocks fell for the fifth time in six days after the Federal Reserve pressed on with cuts to U.S. economic stimulus and as a report showed China’s manufacturing industry contracted.
The MSCI Asia Pacific Index lost 1.6 percent to 134.54 as of 12:23 p.m. in Hong Kong, with all 10 industry groups on the gauge falling. The measure has dropped 4.8 percent in January, on course for the biggest monthly slump since May as part of a global equities rout sparked by weaker-than-expected economic data from China and a sell-off in emerging-market currencies.
“Given the likelihood of continued Fed tapering in the period ahead, there appears little doubt that long emerging market positions are likely to be subjected to near-term pressure,” Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Ltd., which manages about $25 billion, said in an e-mail, referring to bets on gains in developing-nation assets. “What we are seeing at present is a global re-pricing of risk.”
USA
The Fed cut the pace of monthly bond buying for a second straight meeting, saying it will reduce purchases by another $10 billion to $65 billion, sticking to a plan for a gradual withdrawal from its unprecedented monetary easing. The central bank left unchanged its statement that it will probably hold its target interest rate near zero “well past the time” that the unemployment rate falls below 6.5 percent.
U.S. stocks sank yesterday as earnings forecasts from Yahoo! Inc. and AT&T Inc. disappointed investors. Yahoo slumped 8.7 percent as its sales outlook signaled slowing growth for the Internet company. Boeing Co. retreated 5.3 percent and AT&T lost 1.2 percent after forecasts trailed some analysts’ estimates. The S&P 500 sank 1 percent for its lowest close since Nov. 12. Futures on the measure gained 0.2 percent today.
China Manufacturing
The final reading on HSBC Holdings Plc and Markit Economics Ltd.’s January purchasing managers’ index for Chinese manufacturing was 49.5, the first contraction in six months. Readings below 50 indicate contraction.
FTSE Outlook
I think the FTSE is going to test the daily pivot at 6557 area initially today before a drop back to test the support area at 6480/90 where we have a weak rising 30 minute channel. There is the bottom of the 20 day Bianca channel currently at 6514 which has been tested and broken quite a few times this week, though we are currently seeing quite volatile sessions. There is the bottom of the 10 day at 6429 though I don’t think we will get that low today. 6460 might be the bottom today and a decent area to go long.
I got the dip and rise scenario wrong yesterday, as it was rise then dip, however today I think we will get rise dip rise!
The main supports to watch are 6484 and 6460, whilst resistance at 6550/60.