Good morning. My first short at 6414 didn’t really work out yesterday, however, shorting from the 6455 area did, as did the 2113 level on the S&P so all in all it wasn’t too bad. The markets are pretty choppy at the moment and feel like they are not sure if they want to go up or down! Yellen again mentioned a December rate rise during her speech yesterday, though the question being asked in some quarters is if the US economy is strong enough to support the rise. However, with an ADP figure of 182k yesterday data would suggest that is. I am sure that data releases through the rest of November are going to be closely watched. With regard to the FTSE yesterday, supermarkets rose on the back of good Marks and Spencer results while house builders fell due to fears of interest rate rises. Initially commodity shares were strong but fell back after concerns of global commodities demand.
US & Asia Overnight from Bloomberg
Most Asian stocks advanced after comments from Federal Reserve Chair Janet Yellen boosted the dollar against the yen, spurring equity gains in Tokyo.
Two stocks rose for each that fell on the MSCI Asia Pacific Index, which added 0.1 percent to 134.92 as of 9:09 a.m. in Tokyo. The Topix index climbed 0.9 percent. U.S. shares slid on Wednesday and the greenback strengthened after Yellen, speaking before the House Financial Services Committee, said an improving economy has set the stage for a December interest-rate increase if reports continue to assure policy makers that inflation will accelerate over time. Companies in the U.S. added 182,000 workers to payrolls in October, signaling steady improvement, figures released by ADP Research Institute showed.
“Sentiment towards a December hike is alive and well after Yellen’s comments,” Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand Ltd., wrote in a note to clients. “The Fed needs to move for credibility reasons and start nudging markets away from the cheap money sugar pill.”
Following Yellen’s remarks, Fed Bank of New York President William Dudley said at press briefing he “completely” agrees with Yellen that December is “a live possibility” for liftoff on rates. Investors are also waiting to hear from Vice Chair Stanley Fischer. Traders now price in a 58 percent chance the central bank will increase rates at its December meeting.
South Korea’s Kospi index lost 0.3 percent. Australia’s S&P/ASX 200 Index sank 1.1 percent. New Zealand’s S&P NZX 50 Index slid 0.2 percent. Markets in China and Hong Kong have yet to start trading.
China Stocks
China’s stocks rose the most in seven weeks on Wednesday, led by financial and technology companies, after the government unveiled its five-year plan to bolster the economy and investors speculated on the start of a trading link between Shenzhen and Hong Kong. The Shanghai Composite Index climbed 4.3 percent, while the Hang Seng China Enterprises Index of mainland companies in Hong Kong jumped 2.7 percent.
Annual growth should be no less than 6.5 percent in the next five years to realize the goal to double 2010 gross domestic product and per capita income by 2020, President Xi Jinping said late Tuesday, according to the official Xinhua News Agency. China will also seek to increase the yuan’s convertibility in an orderly manner by 2020 and change the way it manages currency policy, according to the five-year plan.
E-mini futures on the S&P 500 lost less than 0.1 percent. [Bloomberg]
FTSE Outlook
The 10minute chart is bullish to start with and overnight the FTSE has managed to hold onto its gains made yesterday, with 6405 showing as I write this. We have the daily pivot at 6412 as the first resistance level for the bulls with 6430 and 6440 above that. I am thinking that we will see an initial rise to those upper levels before more downside. The bulls were not able to break 6460 yesterday and the S&P wasn’t able to crack on above the all time highs. So, while the charts (2hr, daily) are bullish, I am cautiously so, and still think shorts off the rallies are a decent strategy. 6440 is the top of the 10 day Bianca with 6471 for the 20 above that. The 10 day channel tops are slightly lower each day which is why I think shorting the rallies should pay off. We have the UK interest rate decision at 12pm today, I expect once again to show no change, and US jobs data and continuing claims at 13:30.NFP tomorrow should also provide clues as to the possible rate rise in December (forecast is 180k).
Back to the FTSE and the 30min 200ema is at 6393 and has provided support when tested recently, however, if it continues to be tested then I expect it will break soon. If so then a decline to 6325 looks likely.