Good morning. The rise from Wednesday managed to continue for most of Thursday and there wasn’t even much of a dip, stopping at 6544. They are cutting it fine but only 200 points till the yearend target of 6800! Main news overnight is that the EU has been downgraded by S&P from AAA to AA+ based on the fact that cohesion has weakened and its financial profile has deteriorated. The outlook is stable, the company said in a statement today. “The downgrade reflects our view of the overall weaker creditworthiness of the EU’s 28 member states,” S&P said.
For the FTSE today, if prices can exceed 6600 then we should see 6640 as we are possibly about to break out of the daily channels. 6723 is also on the radar for early next week which is the top of the 50 day Bianca channel.
One thing to watch today is triple witching as options expire – so it will get a bit choppy at around 10:15-10:30am.
Asia Overnight from Bloomberg
Asian stocks fell for the first time in four days, led by Chinese shares amid concern funding costs for lenders will remain high even after the country’s central bank injected cash into the financial system.
The MSCI Asia Pacific Index fell 0.1 percent to 138.22 as of 2:20 p.m. in Hong Kong. The Hang Seng China Enterprises Index of mainland shares listed in the city retreated 1.7 percent, on course to lose 3.9 percent this week. The Chinese central bank said at the close of market trading yesterday that it added funding to selected lenders using short-term liquidity operations after money-market rates surged.
“Even though the People’s Bank of China yesterday injected little bit of funds to the market, it may not be enough and liquidity is bound to remain tight because it’s year-end,” said Ben Kwong, Hong Kong-based chief operating officer at brokerage KGI Asia Ltd. “Higher interbank rates will continue to depress the Hong Kong stock market.”
Fed Stimulus
The MSCI Asia Pacific Index gained 6.9 percent this year as central-bank stimulus shored up global economic growth. The gauge yesterday traded at 13.7 times estimated earnings, compared with 16.3 for the Standard & Poor’s 500 Index and 15.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The Federal Reserve will reduce bond purchases in $10 billion increments over the next seven meetings before ending its stimulus program in December 2014, according to the median forecast of 41 economists surveyed by Bloomberg.
Futures on the S&P 500 Index gained 0.2 percent today. The gauge yesterday lost 0.1 percent in New York after surging 1.7 percent to a record the previous day when the Fed decided to cut stimulus.
FTSE Outlook
While I have been writing this the IG chart just had a strange spike to 6655 then dropped back to 6600. Bit odd and the cynics often say these are stop killers before a bigger move (which would be down in this case) as the spike stopped out the shorts. However, putting that to one side, we are breaking out of the 20 day Raff channel now, so if the S&P and Dax can do the same its all looking good for a decent year end (6800 still on my radar). With the breakout, it is likely that prices will dip back to test the top of that channel before further upside. With that spike to 6655 I expect that we will see that level again soon, computers probably just showed their hand that was all it was. If we can close the week above 6593 then the bullishness should continue next week.