Support 6168 6158 6148 6079 6056
Resistance 6221 6226 6228 6256 6305
Good morning.
Market Summary for Wednesday 16th March 2016
The main feature of the day was the UK Budget which saw some positives for the oil and housebuilding sectors.
The FT100 traded nervously in a narrow band before the budget started but then steadily moved up as the oil sector and housing sector moved higher. It traded as low as 6135 in the morning and then hit 6180 after the budget to settle at 6175 at the close.
The FED impacted at 6pm whereby they lowered projections for interest rate cuts this year. Markets and especially gold rallied on the news. to too bad a day int he end for the order trades – few got stopped out then the FTSE short and Gold long saved the day both with decent gains.
US & Asia Overnight from Bloomberg
- Fed lowers projection for interest-rate increases this year
- U.S, U.K. equity index futures gain; copper, aluminum advance
Asian shares rose the most in two weeks and the region’s emerging-market currencies strengthened after the Federal Reserve scaled back its projection for interest-rate hikes. Oil and copper advanced.
The MSCI Asia Pacific Index was headed for its highest close since early January and U.S. stock index futures advanced. Raw-material producers led gains as commodity prices rallied, with crude climbing above $39 a barrel in New York after data showed a drop in U.S. output. South Korea’s won jumped the most since 2011, while better-than-expected economic data gave a lift to the Australian and New Zealand dollars. The yen retreated with gold.
Fed officials predicted two quarter-point rate increases for this year at a Wednesday policy review, having forecast four in December when they boosted borrowing costs for the first time in almost a decade. In adopting a move dovish stance, the U.S. central bank cited risks to global economic growth that have spurred monetary easing in China, Europe and Japan over the past two months. The Bank of England will meet to decide on borrowing costs on Thursday, as will its counterparts in Indonesia and South Africa.
“The Fed’s stance is relatively friendly,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “The difference in the stance between the market and the authorities has shrunk, and we’ve managed to get through an important event without drama. Investor sentiment has returned to a neutral zone from a bearish zone that had priced in too much concern.”
Almost $9 trillion was wiped off the value of global stocks in the first six weeks of the year as a sliding oil price and concern about the state of China’s economy spurred a selloff in the securities. Crude has since rebounded to levels last seen in early December and equities have recouped some $5 trillion of their losses. Fed Chair Janet Yellen said last month that market turbulence had “significantly” tightened financial conditions by pushing down stock prices, strengthening the dollar and boosting some borrowing costs.
“The Fed has clearly been rattled by the nasty selloff seen at the start of 2016,” Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients. Wednesday’s policy update “was far more dovish than markets had expected,” he wrote.
Stocks
The MSCI Asia Pacific Index jumped 2.1 percent as of 1:04 p.m. Tokyo time. BHP Billiton Ltd., the world’s biggest mining company, climbed 2.8 percent in Sydney. Cnooc Ltd., China’s biggest offshore oil and gas producer, surged more than 5 percent in Hong Kong. Benchmarks in Australia, Hong Kong and South Korea posted gains of at least 1 percent.
Standard & Poor’s 500 Index futures rose 0.3 percent, while contracts on the U.K.’s FTSE 100 Index added 0.7 percent.
Commodities
West Texas Intermediate crude climbed 1.6 percent to $39.09 a barrel, after surging 5.8 percent in the last session. U.S. output slid to the lowest level since November 2014 and inventories expanded by 1.3 million barrels, the smallest increase in five weeks, data showed Wednesday. Major producers plan to meet April 17 in Doha to discuss a commitment to freezing output, Qatar’s energy minister said.
Copper advanced 1.4 percent to about $5,000 a metric ton in London, while aluminum, zinc and lead all gained more than 1 percent. Copper is likely to retreat in the second half and average between $4,200 and $4,300 this year, according to the head of Xi’an Maike Metals International Group, one of China’s biggest traders of the metal.
Gold, regarded as a haven investment, dropped 0.5 percent. It surged 2.5 percent on Wednesday as the Fed announcement weakened the greenback.
Currencies
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was headed for its lowest close since October. Wednesday’s 1.1 percent slide in the gauge was the steepest in six weeks.
“Currency reaction suggests market expectations for the Fed’s rate outlook were slightly more bullish,” Hiroshi Kurihara, chief U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The dollar’s been sluggish despite some positive signs over growth, hinting that it’s sensitive to negative news and that its advance may not be strong even as a rate hike approaches.”
South Korea’s won led gains in Asia, surging 1.7 percent as the Malaysian ringgit jumped 1.2 percent. Australia’s dollar advanced to an eight-month high after the nation’s jobless rate unexpectedly declined, while New Zealand’s currency rose to its strongest level in more than a week after fourth-quarter economic growth beat projections. Indonesia’s rupiah gained 1 percent before a forecast cut in interest rates at a central bank policy meeting on Thursday.
“Emerging-market and Asian currencies should do well because at least for the next month or two the Fed is likely to remain dovish unless data picks up really strongly,” said Binay Chandgothia, a Hong Kong-based fund manager at Principal Global Investors, which manages $331 billion, told Bloomberg TV.
The yen was little changed near its strongest level in more than a week versus the dollar and the British pound was also steady. The Bank of England is forecast to leave interest rates unchanged on Thursday and maintain current stimulus levels.
Bonds
The Fed’s lowering of its projected path for interest-rate increases fueled gains in fixed-income securities across most of Asia. Australia’s 10-year bond yield fell six basis points to 2.57 percent and Singapore’s dropped nine basis points to 2.09 percent. Rates on similar-maturity U.S. Treasuries fell one basis point to 1.90 percent following a six basis-point drop on Wednesday.
Japan’s 10-year bonds yielded minus 0.05 percent. The government sold 20-year debt today at an average yield of 0.427 percent, a record low. [Bloomberg]
FTSE 100 Outlook and Prediction
As you would expect the Fed reduced the likelihood of 3 rate rises, as the rest of the world is doing the opposite, and it looks likely that my wild thought of a rally to 6350 is coming to pass. Which also means that we are going to have a bigger down leg from higher up instead. For today we have the pivot at 6168 for the main support area, and whilst the bulls managed to pop above 6200 overnight it dropped back from the most recent high area at 6220. I expect us to have another go at that level in hours and then if we drop back to the pivot I feel that a long there will be worth a go. The more times that the 6200 area is tested then we will break through and if it holds then it will become support for a push higher. Just above this there is a PRT resistance line at 6226 and the 10 day Bianca at 6228, so a couple of hurdles for the bulls to break, but if they do then i expect we will be looking at 6300 pretty quickly, and 6326 for the top of the 20 day Bianca. Generally then today I am still feeling bullish, with a buy the dips stance. That said, a short off those daily resistance levels at 6226 for a dip to the pivot is also worth a go I think first thing.