Support 7018, 7005, 6861, 6813 Resistance 7070, 7102, 7168, 7200

Good morning. I hope you all had a good weekend. Well the election result certainly helped the FTSE on Friday, rebounding from the pre election result low of 6808 to reach 7050, where it has stayed since. China cut interest rates for the 3rd time in 6 months but interestingly the FTSE hasn’t risen too much more on that news. The main stories as you would expect over the weekend are post election and now the landscape has changed, how the Tories will get on with the strong SNP showing in Westminster. I have a hunch that Labour will not win again now till 2025, and will have David Miliband at the helm at that time, with the next leader (probably Yvette Cooper) fallen on their sword after losing in 2020. Pure speculation but just putting it out there! Anyway, we should be on for a fairly decent FTSE performance over the next 5 years as various business leaders will certainly be relieved that David Cameron is in with a majority. Mind you, I imagine he will have to oversee interest rate rises during that time.

US & Asia Overnight from Bloomberg
Asian stocks gained after China’s central bank cut interest rates for the third time in six months. The euro weakened and bonds climbed on concern that Greece will struggle to secure more aid.

The MSCI Asia Pacific Index rose 0.5 percent by 1:14 p.m. in Tokyo, trimming an advance of as much as 0.9 percent. A gauge of Chinese stocks in Hong Kong rose 0.3 percent. Standard & Poor’s 500 Index futures fluctuated after the measure gained the most in almost two months Friday. Ten-year Treasury yields dropped for a third day. The euro weakened 0.5 percent versus the U.S. currency and New Zealand’s dollar lost 1.4 percent.

China is bolstering stimulus as data signal the world’s second-largest economy may struggle to meet its official growth target of about 7 percent. U.S.-payroll growth in April came in just below estimates the March gain was revised down to the lowest since 2012, further pushing back estimates for when the Federal Reserve may increase rates. Euro-area finance ministers meet Monday as resistance to further help for Greece builds.

“China’s rate cut was symbolic,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which oversees about $474 billion. “The U.S. jobs figures weren’t bad, but not strong enough for a rate increase, so the outlook for a rate rise has been pushed back. The stock market is now a monetary policy market.”

Hong Kong
The People’s Bank of China cut the one-year lending rate 0.25 percentage point to 5.1 percent, and reduced the one-year deposit rate by the same amount to 2.25 percent. The central bank also raise the limit on what banks can pay savers.

Hong Kong’s Hang Seng China Enterprises Index climbed after swinging from an increase of 1.1 percent to a drop of 0.2 percent. The Hang Seng Index advanced 0.5 percent.

The size of the cut “was less than some had hoped for,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc. “The rate cut is obviously positive for the economy, but the market had been expecting it so there wasn’t much of a surprise.”

The Shanghai Composite Index erased an early loss to add 1.2 percent. Even after rising 2.3 percent Friday, the benchmark for China’s biggest equity venue ended last week 5.3 percent lower, the biggest such slump since July 2010. Data at the weekend showed Chinese consumer prices rose in April at half the government’s target for 2015.

Australia’s S&P/ASX 200 Index pared its gain to 0.2 percent after climbing as much as 1.1 percent in early trading. The Australian dollar slipped 0.5 percent to 78.93 U.S. cents. China is the South Pacific country’s biggest trading partner.

Accidental Default
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 of its most-traded peers, climbed 0.3 percent. The euro slid to $1.1144 and the pound weakened 0.2 percent. Poland’s zloty slid 0.9 percent after a shock defeat for President Bronislaw Komorowski in first round voting at the weekend. A run-off against opposition candidate Andrzej Duda will be held May 24.

Members of German Chancellor Angela Merkel’s Christian Democratic bloc are openly challenging her stance of keeping Europe’s most-indebted country in the 19-nation currency region. Governments can sometimes default by accident, German Finance Minister Wolfgang Schaeuble warned in an interview with Frankfurter Allgemeine Sonntagszeitung published Saturday.

The kiwi dropped to 73.84 U.S. cents, while the Aussie bought NZ$1.068 after reaching NZ$1.0698, the highest since Feb. 3. ANZ Bank New Zealand Ltd. and First NZ Capital Ltd. joined five other banks in predicting lower New Zealand rates this year.

U.S. employers added 223,000 workers to nonfarm payrolls in April, after a 85,000 increase in March that was the smallest since June 2012. The jobless rate fell to 5.4 percent from 5.5 percent, the lowest since May 2008.

The S&P 500’s 1.3 percent advance Friday erased a loss for the week that was spurred by concern the economy was slowing as the Fed considers raising rates. The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was up 0.2 percent after slipping 0.1 percent on Friday. [Ref]

FTSE Outlook

I am looking at 2 main levels today – 7070 the top of the 30 minute channel and the daily pivot for support at 7018. The live charts pivot is slightly lower at 6993 so support here if the IG one breaks. I have plotted an initial rise to that 7070 area as the moving averages are currently bullish and also not he daily, the 10ema has crossed back to bull above the 25ema. That is showing support at the 7005 area now. Therefore a long off the pivot with a stop just below this area might well pay off. The elephant int he room that has taken a back seat is Greece and with various deadlines due to hit this week I expect we will see some more turbulence off the back of that. China interest rate cut has certainly had a muted performance not he FTSE so far. I am still watching the S&P for a potential rise to 2140. So for the moment it looks bullish but with the breakout above the Bianca channels – both around 7040 – we might be pushing for a FTSE rise to around the 7150 area where we have the top of the 20 day Raff before a bit of a pullback. If we follow the ASX200 (Australia) then rise and a dip would fit quite well.