Good morning. What a day that was. The bulls failed miserably, and then IG went off line for most of the morning. Guess which platform I use!? My long order took and got stopped for -10 about 5 seconds laters as the FTSE was completely spooked by Goldman Sacs saying they reckon a Labour win looks likely. Dave Clark of Tesco did a marvellous “kitchen-sinking” exercise to start with a clean slate, revealing a £6.4bn loss for Tesco – the largest in UK retail history. Should make him look good now for the turn around. Just looking at the FTSE over the past week or so I think its going to be very jittery running up to the election. As I mentioned in that afternoon email, there is support around 6990 though, so it will be interesting to see if the fall in gold yesterday corresponds with an uplift in equites, though the Dax has dropped off the top of the 10 day Raff so far. Interesting times, and the FTSE still looks bearish to start with today.
US & Asia Overnight from Bloomberg
Asian stocks rose for a third day, after U.S. equities climbed toward records, as Japanese shares gained on a weaker yen and investors awaited a private report on Chinese manufacturing.
A Chinese manufacturing gauge fell to a 12-month low in April, suggesting government efforts to cushion a slowdown are yet to revive the nation’s factories.
The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.2, missing the median estimate of 49.6 in a Bloomberg survey, which was also March’s final reading. Numbers below 50 indicate contraction.
The first reading of the economy’s health in April may deepen concern over a slowdown after first-quarter data showed the weakest economic expansion since 2009. Policy makers have stepped up efforts to halt the slide, cutting banks’ reserve requirements by 1 percentage point this week.
The MSCI Asia Pacific Index added 0.2 percent to 154.99 as of 9:02 a.m. in Tokyo. Japan’s Topix index increased 0.7 percent after the Standard & Poor’s 500 Index rose 0.5 percent Wednesday. Economists forecast the preliminary HSBC Holdings Plc/Markit Economics manufacturing purchasing managers’ index for China will come in at 49.6 for April, matching March’s reading. Futures on the Hang Seng China Enterprises Index and Hang Seng Index climbed at least 0.7 percent.
“The mass inflows into Chinese equities look set to continue,” said Stan Shamu, Melbourne-based market strategist at IG Ltd. “The likes of the H-Shares and the Hang Seng are cheap compared to historical measures and regional peers. I expect Chinese indices to continue their outperformance in the coming few months.”
The Hang Seng China Enterprises Index trades at 10.3 times estimated earnings and the Hang Seng Index has a multiple of 13.4. That compares with 14.7 on the MSCI Asia Pacific Index and 17.9 on the Standard & Poor’s 500 Index.
Japan’s Nikkei 225 Stock Average added 0.6 percent as the yen slid for a fourth day against the dollar. The measure closed above 20,000 yesterday for the first time since April 2000.
Regional Gauges
Australia’s S&P/ASX 200 Index rose 0.2 percent. South Korea’s Kospi index climbed 0.5 percent after the nation’s first-quarter gross domestic product beat estimates. New Zealand’s NZX 50 Index slipped 0.2 percent. Markets in Hong Kong and China have yet to open.
E-mini futures on the S&P 500 slipped 0.1 percent. The underlying gauge rose on Wednesday amid results from Coca-Cola Co. and McDonald’s Corp. The S&P 500 is less than 0.5 percent away from an all-time reached on March 2. American equities have fluctuated during the past month amid concerns that a stronger dollar and lower oil prices would hurt corporate earnings as the Fed considers when to raise interest rates.
Sony Corp. climbed 3 percent after raising its profit forecast for the second time since February as Chief Executive Officer Kazuo Hirai’s revamp stokes earnings from games and financial services. [Ref]
FTSE Outlook and Trading Strategies
A tricky one to call today but I am going to go for an initial dip and rise. I have support at 6990, 6982 and then 6945. As such I think we may see a bounce from the 6982/90 area and feel this is worth a long. Thats mainly based off the daily charts as we have the 10 day Bianca, 20 day Raff and the 25ema showing support around that area. If that level breaks though then i expect a dip down to 6960, and possibly even 6924 where we have the bottom of the 20 day Bianca. The 10 and 30min charts are currently bearish as I write this so it will be interesting to see if those initial sports hold on any dip. 7000 held yesterday though the rise at the close was helped by some divi hunters coming in for the 10 point divi. Todays pivot is 7039 so there is initial resistance there for any rise, with 7047 and 7070; then there is also the top of the 10 day Bianca at 7101 and the 10 day raff at 7105. I think the bulls might struggle a bit around this area, though 7120 is still on the radar.
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