Good morning. An interesting day yesterday that wasn’t overly clear, at least for me. We got the drop initially but only as far as 7010, before climbing and nearly reaching the shorting area at 7069 where had the top of the Bianca channel, bulls falling just short at 7065. It looked like they were going to be stronger, but the Germanwings plane crash upset things a little. Inflation came in at 0%, the lowest since records started, stoking a few fears about deflation – though some quarters are expecting a dip into that this year. The BoE seemed more worried about deflation when they were talking last year but seem fairly ambivalent about it this time. Greece continues to rumble on and according to reports, the ECB will move to officially ban Greek banks from increasing their holdings of the country’s short-term sovereign debt, in a bid to break a potentially toxic link between lenders and the stricken sovereign. The restriction will place a further squeeze on the cash-strapped Greek government, which could run out of money to pay wages and pensions by the end of next month.
US & Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks rose, with the regional benchmark index recovering Tuesday’s loss to head for a six-month high, as consumer staples and materials shares led gains.
The MSCI Asia Pacific Index added 0.2 percent to 148.98 as of 9:03 a.m. in Tokyo. The measure climbed 7.8 percent this year through Tuesday, bringing valuations to 15 times estimated earnings, the highest since May 2010. That compares with 17.7 times for the Standard & Poor’s 500 Index.
Earnings multiples are “a cause for concern and the reason why I see risk in the markets,” Evan Lucas, a strategist at IG Ltd., said in an e-mail to clients. Still, he wrote, “the momentum is clearly telling me the next move is still to the upside.”
Japan’s Topix index added 0.3 percent. Australia’s S&P/ASX 200 Index rose 0.2 percent. New Zealand’s NZX 50 Index slipped 0.1 percent. Markets in China and Hong Kong have yet to open.
South Korea’s Kospi index was little changed. The nation’s fourth-quarter economic growth was revised down to 0.3 percent from the previous three months, compared with an earlier estimate of 0.4 percent.
The Shanghai Composite Index gained 0.1 percent at the close Tuesday, erasing losses of as much as 2.4 percent and capping a 10-day advance, the longest winning streak in almost 23 years. Turnover climbed to a record in volatile trading as investors bet weaker-than-estimated China manufacturing will spur further monetary stimulus.
China Banks
Agricultural Bank of China Ltd., the first of the nation’s biggest lenders to report fourth-quarter earnings, posted an unexpected decline in profit as net fee income fell and bad-loan provisions swelled. Bank of China Ltd. is due to report full-year results today.
E-mini futures on the S&P 500 were little changed. The U.S. equity benchmark index slipped 0.6 percent Tuesday, declining for a second day.
The cost of living in the U.S., excluding food and fuel rose more than forecast, climbed 0.2 percent in February as fuel costs stabilized. Federal Reserve Chair Janet Yellen signaled last week that the central bank is in no hurry to raise rates after the central bank dropped a pledge to be patient on tightening.
European officials are preparing to assess Greece’s third set of economic policy proposals after German Chancellor Angela Merkel met with Greek Prime Minister Alexis Tsipras on Monday and urged him to do what is needed to qualify for aid. Billionaire investor George Soros said the chances of Greece leaving the euro area are now 50-50. [Ref]
FTSE Outlook
I’m feeling a bit bullish today, as long at 7000 holds on any early dip. We have just dipped below the 10 day Bianca channel at 7025, so a rise to test that pre market open is likely, and with the pivot at 7026, we should have a little bit of resistance there. I wouldn’t be surprised if we dip from there to 7000 at the open and then bounce back. If 7000 does break then 6979 and 6935 are the next supports of note; while low down 6908 is the 25ema on daily (worth a long) and 6893. Resistance above the pivot is 7066 – yesterdays high – then 7077, and 7107 which is the top of the 20 day Bianca. The 20 day Raff has resistance at 7130.
The trends are still up looking at the daily channels, though a lot hinges on 7000 holding – when that does eventually break, (and break properly rather than sneak below and bounce back which is what I think we will get today, to test the 200ema on the 30min at the 6995 area), we should drop down to test the 25ema line on the daily, 6908 for today.