Good morning. Was a bit more bearish than I thought it would be yesterday with a drop down to the support area around 6770. Little bit of a bouche from there last night, but generally it still looks like there is more downside to come. The uncertainty over Greece is not helping the bulls decide to buy into this just yet and a lot are keeping their powder dry till there is some sort of confirmed outcome. G& meeting happening at the moment so various leaders speeches are also having an effect. Be interesting to see if there is any sort of bull Tuesday today! Asia has been pretty weak overnight again, falling for the seventh consecutive day. Its all about interest rate rises again, which look like the US will do later this year, though they will not want to do it too early and stifle any sort of economic recovery.
US & Asia Overnight from Bloomberg
Asian stocks fell for a seventh day after China inflation data fanned concern demand is cooling in the world’s second-biggest economy as the U.S. prepares to raise interest rates. The euro strengthened and oil gained.
The MSCI Asia Pacific Index dropped 0.7 percent at 1:24 p.m. in Hong Kong, led by slides in the technology sector. China’s equities fell before MSCI Inc. decides on their inclusion in global benchmarks, while U.S. index futures were little changed. The euro gained 0.3 percent against the dollar. Crude oil advanced before U.S. stockpiles data on Wednesday and copper rose.
China’s factory-gate prices extended a record stretch of declines, underscoring tepid demand at home and abroad. In the U.S., traders continue to mull the timeline for higher interest rates, while Group of Seven leaders meet in Germany, with Chancellor Angela Merkel demanding urgent action from Greece to cement its euro-area membership.
“We still have concerns over U.S. monetary policy and Greece hanging over our heads,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo. “If the U.S. moves towards raising rates, bonds will be sold and, if that turns into a big move, there’ll also be consequences for stocks.”
Almost four shares declined for every one that rose on the MSCI Asia Pacific Index. HTC Corp. plunged by the daily 10 percent limit in Taipei for a second day after the smartphone maker slashed its sales forecast. Samsung Electronics Co. lost 2.7 percent in Seoul.
Benchmark share gauges declined across the region, with Japan’s Topix index slipping 0.9 percent and the Jakarta Composite Index poised to enter a correction. The MSCI Emerging Markets Index dropped for a 12th day, its longest losing streak since 1990.
China Demand
The Shanghai Composite Index of shares fell 0.7 percent and the Hang Seng China Enterprises Index slid 1.6 percent. Shares of Chinese rail company CRRC Corp. sank 8.3 percent in Shanghai as Goldman Sachs Group Inc. advised investors to sell, while its Hong Kong-listed securities tumbled 11 percent.
China’s consumer-price index increased 1.2 percent last month from a year earlier, less than the 1.3 percent median estimate in a Bloomberg survey. The producer-price index fell 4.6 percent, extending more than three years of declines.
“A trio of growth engines — exports, consumption and investments — are all weak and argues for more aggressive stimulus to jump-start the economy,” said Neil Lee, a Hong Kong-based analyst at Pedder Street Investment Management Ltd. “What’s heavily on the minds of traders today is also MSCI’s decision, which is a close call. The market will stay very volatile.”
Dollar Retreat
The Bloomberg Dollar Spot Index, a gauge of the greenback’s strength, fell 0.1 percent after dropping 1 percent on Monday. The currency’s retreat was sparked by comments from a French official, who said U.S. President Barack Obama had told fellow G-7 leaders the strong greenback posed a problem. Obama later denied saying such a thing.
The euro strengthened to $1.1320, after jumping 1.6 percent to $1.1291 in the last session. South Korea’s won rose 0.3 percent against the dollar, after dropping on Monday to its weakest level since March. Malaysia’s ringgit added 0.3 percent, rebounding from its lowest since 2006.
In the commodities market, West Texas Intermediate crude rose 0.5 percent to $58.44 a barrel after sliding 1.7 percent on Monday. Crude inventories probably fell by 1.45 million barrels through the week ended June 5, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
Copper advanced 0.5 percent, leading most base metals higher in London and rising for a third day, the longest run of gains in more than a month. [Ref]
FTSE Outlook
Todays pivot is 6793 so we have initial resistance there, but i have plotted a decline from the off for today as looking at the moving averages and a fairly weak overnight session means we might well dip down to the bottom of that 30min channel first. We also have the bottom of the 10 day Bianca channel for today at 6723 o just below that area. The 20 day is 6777 which is pretty much where we are as I write this. Of some hope for the bulls is that the Dax is nearing its 200ema on the daily chart so could well find some support at 10970 which if it did would help the FTSE bulls too. The Dax has experienced over 11% correction from its recent highs. Back to the FTSE, and above the pivot we have resistance at 6819 and then the 200ema at 6840 on the 30min. There is the 25ema on daily at 6930 as well which would be a good shorting spot.
I have gone for a dip and rise today with that 10 day channel holding, and initially declining from the 6784 area. It might well be an interesting open though with that 6777 support, but the short term trends are down. If the bulls can break 6785 to start with then the pivot and possibly back above 6800 is on the cards.