Support 6165 6147 6137 6098
Resistance 6179 6190 6220 6279
Good morning.
Market Summary for Tuesday 22nd March 2016
The events in Brussels meant the FT100 opened sharply lower but then managed to recover back to break-even by the end of the day. Unfortunately these events lead to a market overreaction so the support at 6137 was breached. I think that level would have been fine had it not been for the attacks – especially as it then did bounce back to retest the 6200 level. However, it has added to making markets jittery on top of everything else.
In economic terms there was very little news that affected the markets.
The tourism sector was hit the hardest for obvious reasons but beyond that there were no stand out sector moves.
US & Asia Overnight from Bloomberg
- Gold declines, wiping out gains made after Brussels attacks
- Australian bonds fall after declines in U.S. Treasuries
Asian stocks declined as oil retreated from a three-month high amid a build-up of U.S. crude stockpiles. Precious metals declined as haven demand sparked by deadly terror attacks in Brussels proved fleeting.
Raw-materials producers and industrial companies led losses on the MSCI Asia Pacific Index, which slipped from its highest close since Jan. 1. Brent crude dropped before data that’s forecast to show American inventories, already at the highest level in more than eight decades, are still climbing. Gold sank as the Bloomberg Dollar Spot Index rallied for a fourth day. The British pound fell toward a one-week low after the explosions that killed at least 31 people in the Belgian capital stoked bets on the U.K. leaving the European Union. Malaysia’s ringgit strengthened versus all 31 major peers.
The weekly release of data on U.S. oil inventories is watched by the market as investors fret about oversupply issues and producers float the possibility of a freeze in output. Industry figures foreshadowed an increase of 8.8 million barrels in America, which is the world’s biggest consumer of crude. While the bomb attacks at the Brussels airport and a subway station initially hit equities and bolstered the yen, the impact dissipated in the U.S. trading day. Terrorist incidents including the one in France last year and the London bombings in 2005 spurred stock selloffs that were erased in the ensuing weeks.
“Usually such attacks will have only a short-term impact,” said Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm. “Investors focus remains on macro-economic fundamentals and we do need to see more signs of sustainability in the U.S. economy and some stability in the Chinese data. I’m somewhat cautious given the recent rally we’ve seen.”
German Finance Minister Wolfgang Schaeuble is due to outline his 2017 budget on Wednesday and a draft of the announcement showed plans to boost German defense and infrastructure spending as part of a proposed 2.7 percent increase in government outlays. Both Thailand and the Philippines are expected to keep benchmark interest rates on hold in reviews Wednesday.
Stocks
The MSCI Asia Pacific Index fell 0.7 percent as of 2:38 p.m. Tokyo time, poised for its biggest loss in a week. BHP Billiton Ltd., the world’s largest mining company, slid 1.7 percent in Sydney. Newcrest Mining Ltd., Australia’s biggest gold producer, sank 4.8 percent.
Australia’s S&P/ASX 200 Index fell 0.5 percent , while benchmark shares gauges in China, Hong Kong and Japan declined by at least 0.3 percent. Futures on the Standard & Poor’s 500 Index slipped 0.1 percent.
Commodities
Brent crude fell 0.9 percent to $41.40 a barrel, having rebounded over the past two months from a 12-year low of less than $28. U.S. stockpiles increased by 8.8 million barrels last week, the industry-funded American Petroleum Institute reported Tuesday, according to a document obtained by Bloomberg. Libya will skip a meeting between major oil exporters in Doha next month to freeze output, according to a person familiar with the situation.
“The large U.S. crude stockpiles will act as a headwind to price gains,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “If producers can agree to remove some incremental supply from the market at the Doha meeting, what they lose in production, they gain in a price rise and additional revenue. Just talking about a freeze has helped oil move higher.”
Gold for immediate delivery fell 1 percent, following a 0.4 percent advance in the last session. The metal jumped as much as 1.3 percent in intraday trading on Tuesday following the Brussels bombings. Platinum declined 1.1 percent and palladium lost 0.9 percent.
“We actually have quite a significant rally in the U.S. dollar over the last four days now,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “We’re seeing that flowing through the gold market and triggering some pre-emptive selling.”
Currencies
The Bloomberg Dollar Spot Index, a gauge of the greenback’s strength, rose to a one-week high after a usually dovish Federal Reserve official signaled his expectation of more interest-rate hikes than the market has priced in. Chicago Fed President Charles Evans on Tuesday said projections for two rate hikes this year were “a pretty good setting” for him. South Korea’s won dropped 0.6 percent, its biggest loss in two weeks.
Malaysia’s ringgit rose as much as 1.2 percent to a seven-month high of 3.9567 per dollar, before paring its advance to 0.3 percent as the greenback advanced. The currency of Asia’s only major net oil exporter has been boosted by the rebound in crude prices over the past two months.
“The market has been caught short ringgit and as a result of that we’re seeing continued short-covering,” said Divya Devesh, the Singapore-based foreign-exchange strategist for Asia at Standard Chartered Plc, who predicts the currency could appreciate to 3.90 a dollar in one to two months. “Oil has been supportive as well recently, it’s still above the $41 level, so that helps as well.”
The pound weakened 0.2 percent to $1.4186, having slid 1.1 percent on Tuesday amid speculation the Brussels terror attacks will boost the case of campaigners who want to see Britain out of the European Union. Pro-“Brexit” politicians argued that migration leaves the nation vulnerable to attack, while figures in the opposing camp, including Prime Minister David Cameron, have said that being part of the economic and political union aids security.
Bonds
The yield on U.S. Treasuries due in a decade held steady at a one-week high of 1.94 percent, after increasing by two basis points on Tuesday. The rate on similar-maturity debt in Australia rose by five basis points to 2.65 percent and New Zealand’s increased six basis points to 3.05 percent. [Bloomberg]
FTSE 100 Outlook and Prediction
We have had some overnight weakness to dip down and test the pivot at 6165 which has held as support. Looking at the 30min chart we have initial resistance at the 6179 area, with a declining channel showing 6190 resistance and support at 6150 then 6110 (yesterdays low also). I have gone for a dip off this channel to test the 6147 Bianca 10 day support first and we will either bounce here and rise back or fall down to 6110. The 2 hour chart is still bearish, with 6192 resistance so this area is the key for the bulls to break to yet again try and hold above 6200. For the moment, its looking like the 6237 recent high is the short term top as we have weakened since testing that. As an alternative plan, a break of 6192 might be worth going long on to target 6237 or higher, however, my preferred plan is a short from this area. We have a 4.35 divi today, so nothing too exciting, but bear it in mind for later as it will affect open positions. No major news is due, just home sales and oil inventories later at 13:30. Generally, the daily trends are still poise, with the bottom of the 10 day Bianca channel steadily rising to 6147 today (versus 6137 yesterday) so the trend is still up though we have stalled in this no mans land area around 6200. It feels like its not totally sure if it should be rising or falling, and its being blamed on Brexit fears. If the 6165 pivot break today then we should see 6147, and if that goes then 6110 and 6098.