Good morning. Well the long worked out ok in the end but it was fairly hard going, I held it open over the close to collect the dividend (a useful 11 points yesterday), but with prices then dipping back closed it at 6700. There wasn’t even that much buying from the divi hunters at the close yesterday. Overnight we have dipped below the 20 day Bianca channel for today at 6689 and have bounced up off the 10 day so far at 6676. Inflation data out yesterday came in at 2.2% for October, below the forecasted 2.5% and the lowest level for more than a year. Generally the UK is enjoying some decent data at the moment with UK growth “firming” according to the OECD. I take it all with a pinch of salt though, as these forecasters are the same ones who said that austerity in Britain was strangling it earlier this year and that the government needed to change their policies. They didn’t and now the data is improving with the UK likely to be the fastest growing G7 economy. So all good then? When the media are all uber bullish time to be a little cautious, though with the price hitting the bottom of the 10 day channel and bouncing a little there is still the possibility of a 6746 test (top of the 10 day channel).
Asia Overnight from Bloomberg
Asian stocks fell after China’s leaders failed to outline steps to curb state dominance of the economy and amid bets the Federal Reserve may start reducing U.S. stimulus next month.
Banks slumped in Hong Kong after a communique at the end of China’s four-day plenum made scant mention of financial reforms. Tencent Holdings Ltd., China’s biggest Internet company, fell 2.5 percent after a news report quoted its chairman saying the company’s valuation is “scarily” high. Noble Group Ltd. lost 5.1 percent in Singapore after Asia’s largest commodity trader by sales said profit slumped. Pioneer Corp. surged 21 percent after the Japanese maker of car stereos reported an unexpected first-half operating profit.
The MSCI Asia Pacific Index dropped 0.9 percent to 138.59 as of 1:53 p.m. in Tokyo, heading for its first decline in three days. All 10 industry groups on the measure fell.
“Quite a few people put on their positions ahead of the communique, expecting actionable moves to be made, but that’s not the case,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “The market is just disappointed.”
S&P
Futures on the S&P 500 lost 0.4 percent today. The measure fell 0.2 percent yesterday as corporate earnings and an improving economy fueled speculation about the Fed’s timetable for reducing stimulus.
Fed Bank of Atlanta President Dennis Lockhart said yesterday a reduction in U.S. bond purchases “could very well take place” next month.
“Tapering is obviously back on the agenda as data in the U.S. continues to be strong,” said Donald Williams, Sydney-based chief investment officer at Platypus Asset Management Ltd., which oversees about A$1.6 billion ($1.5 billion). “Maybe that’s enough for a small correction, but I think with rates at very low levels and likely to remain low, it’s still a good environment for equity markets.”
Fed’s Outlook
Investors will scrutinize U.S. economic reports this week on jobless-benefit claims and manufacturing in the New York area. Economists forecast the central bank will delay tapering asset purchases until its March meeting. Policy makers will probably pare the monthly pace of bond buying to $70 billion from $85 billion at that time, according to the median of 32 estimates in a Bloomberg survey on Nov. 8. The Fed next meets Dec. 17-18.
FTSE Outlook
The 10 day Bianca channel bottom at 6676 has held overnight, and there is still a possibility that the bulls have a bit of a charge left in them to test that 6759 area mentioned a few times. If the bottom of the 10 day channel holds then we could quite easily get a full channel crossing today/tomorrow to hit the 6746/59 area. Support is 6650 today so watching that level closely if the 10 day channel does break as weakness targets 6610 and 6572 after that. As I mentioned above the media are being exceptionally bullish, always a bit of a worry when they are talking everything up. With the Dax looking like a dip to the 9015 area, the FTSE might test the 6676 again pre market. in fact its just dipped 5 points while I write this to 6681. Either way sentiment is starting to swing to the bears I feel based on the weakness creeping in this week, so we are swinging back to looking to short the rallies and 6744 should be a good area if seen, being the top of the 10 day channel. I have plotted the blue arrows as my preferred plan for today which is the long off the bottom of the 10 day channel, however, the pink arrows show the bounce off the 6650 level area if that Bianca channel breaks.