Support 5684 5670 5660 5630 5620 5608
Resistance 5695 5747 5771 5800 5833 5901
Good morning.
Market Summary for Monday
Another day of big negative moves with the FT100 dropping by 2.7%. Initially it appeared there may be a bounce from Friday’s close as the FT100 moved at the open above 5850 however worries about the banking system soon drove prices downwards for most of the day. Finishing below 5700 this is over 1300 points down from the summer peak! The worst performing sector was financials with commodity shares surprisingly strong. Out of hours the FTSE managed to climb to 5735 however its again dropped off from there (hitting the 25ema on the 30min chart as resistance).
US & Asia Overnight from Bloomberg
The global stocks rout intensified with equities in Tokyo sliding the most since August and index futures indicating U.S. stocks will add to declines that sent the Standard & Poor’s 500 Index to a 22-month low. The yen reached its strongest since 2014 and corporate bond risk climbed.
Stock gauges in Japan and Australia slumped and U.S. index futuresslid at least 0.8 percent. Markets from China to South Korea remained closed for Lunar New Year holidays. Evidence of mounting distress in global credit markets boosted government debt, with yields 10-year Japanese bonds tumbling as much as 5 basis points to below zero and Treasuries heading for their best start to a year since 1988. Gold was on track for its longest rally since 2011 as the yen surpassed 115 per dollar. Oil traded at about $30 a barrel.
“Investors had probably thought yesterday we might have hit bottom but they’ve been crushed,” said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co. in Tokyo.
“Greece, Deutsche Bank, shale gas — all we hear is bad news. Investors must have their heads in their hands right now.”
Traders have unwound bets for the Federal Reserve to raise interest rates this year as concern intensified over China’s capacity to deal with its slowing economy, and the impact of Japan’s imposition of negative interest rates. The distress that has brought global equities to the brink of a bear market in 2016 is flaring in the credit space, with the cost of protecting against company defaults worldwide surging. Deutsche Bank AG shares and debt slumped Monday amid questions over the lender’s ability to pay coupons on its riskiest bonds.
Markets in mainland China, Hong Kong, South Korea, Malaysia, Singapore and Taiwan are closed for the New Year holiday Tuesday.
Stocks
Japan’s Topix index tumbled 5.5 percent in Tokyo, falling the most since Aug. 24 as banks and financial shares led losses. The Nikkei 225 Stock Average dropped 5.4 percent, its biggest decline since June 2013.
“The yen is rising while U.S. Treasury yields are falling and gold prices are rising. Basically it’s showing a risk-averse market sentiment,” Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo, said by phone. “With increased concerns of a slowdown in inflation in the U.S. as well, market sentiment is being shaken.”
Energy and banking shares led Australia’s S&P/ASX 200 Index down 2.9 percent. The S&P/NZX 50 Index in Wellington lost 1.3 percent in its first day of trading this week.
MSCI’s All-Country World Index fell 0.4 percent, leaving it down 19 percent from a peak reached in May. Most investors regard a 20 percent retreat from a peak as the definition of a bear market.
Futures on the Standard & Poor’s 500 Index declined 0.9 percent with those on the Dow Jones Industrial Average and contracts on the Nasdaq 100 Index.
Equity losses took hold in Europe on Monday, with banks driving the Stoxx Europe 600 Index to its lowest since October 2014. Deutsche Bank tumbled 9.5 percent as analysts at CreditSights Inc. said it may struggle to pay coupons on its riskiest bonds next year should operating results disappoint or the cost of litigation be higher than expected. The lender said it has sufficient capacity this year and next.
While paring declines in the last hour of trading, the S&P 500 still ended Monday down 1.4 percent. The Nasdaq Composite Index neared a bear market as some of the biggest tech stocks dropped, bringing the gauge’s decline from a July record to 18 percent. [Bloomberg]
FTSE Outlook and Prediction
Yesterday started off looking bullish but the picture soon reversed and we got some pretty massive drops globally. No real reason apart from general fear/panic that everything is screwed! It was mentioned that the Vitol CEO’s negative comments played a part but I feel that was the news trying to fit to the price action rather than the cause. With China closed this week for their Lunar New Year it was eyes on Japan overnight, who shed 5%, to scupper the out of hours rise on the FTSE to 5735. Despite all that we know how fickle the market is so I think we might see a bit of a rise today, if the 5660 area holds as initial support. If not then the next support area is 5630 and I have plotted that with the pink arrows on the chart (blue is preferred, pink is plan B). A rise to the pivot at 5747 is what I am thinking, mainly as we are testing various daily channel areas round here as you can see from the levels to watch section below. If we break 5630 however, then I am fully expecting 5400 before too long, especially with oil remaining below $30. So, cautiously optimistic for today!