Good morning. Hope you had a good weekend. Funny little sell off last thing on Friday saw the FTSE decline 80 odd after hours from 6800 to 6720 and most likely just setting up for a bounce early this week. We are at the bottom of both the 10 and 20 day Bianca channels at 6731 and 6734 so the bulls will be wanting to defend this area for a much towards the pivot initially at 6780. Fairly quiet on the news front over the weekend with the election hoo ha starting now and the usual point scoring etc. Bit weak overnight in Asia with shrinking Chinese manufacturing and a slowing US economy indicated last week. Bounce from nowhere then though bear in mind the theme recently has been bear Monday, bull Tuesday and Wednesday.
Asia Overnight from Bloomberg
(Bloomberg) — Asian stocks fell for a fourth day after data signaled Chinese manufacturing shrank last month for the first time in more than two years and the U.S. economy grew less than forecast.
The MSCI Asia Pacific Index retreated 0.3 percent to 139.98 as of 9:01 a.m. in Tokyo, before markets opened in China and Hong Kong. The measure gained 1.8 percent in January, rebounding from two months of losses.
China’s official purchasing managers’ index showed an unexpected contraction, data at the weekend showed, boosting prospects Asia’s largest economy will add to stimulus amid a wave of global monetary easing. The U.S. economy expanded at a slower pace than forecast in the fourth quarter as cooling business investment, a slump in government outlays and a widening trade gap took some of the luster off the biggest gain in consumer spending in almost nine years.
The China data “will be stoking hard landing fears that are ever present in market thinking,” said Evan Lucas, Melbourne-based market strategist at IG Ltd. “The fact new exports are also declining is a big issue on a macro-level. It illustrates that the lower growth in the global economy is impacting consumption of Chinese goods.”
Japan’s Topix index slid 0.8 percent as the yen gained 0.2 percent to 117.26 per dollar, after strengthening 0.7 percent on Friday. South Korea’s Kospi index was little changed. Australia’s S&P/ASX 200 Index rose 0.3 percent as energy shares gained. New Zealand’s NZX 50 Index fell 0.1 percent.
Futures on the Standard & Poor’s 500 Index were little changed after the underlying gauge last week posted its steepest slide since Dec. 12.
Gross domestic product in the U.S. rose an annualized 2.6 percent in the fourth quarter, trailing the 3 percent growth estimate from economists and falling from 5 percent in the three months to the end of September.
China Economy
HSBC Holdings Plc and Markit Economics release their China manufacturing PMI for January today, after the government’s measure fell to 49.8 from 50.1 in December. That missed the median estimate of 50.2 in a Bloomberg News survey of economists and for the first time since September 2012 fell below the 50 level that separates expansion and contraction.
Crude oil surged Friday by the most since June 2012 after a drop in the U.S. rig count signaled the slump in prices over the past seven months will curb output. West Texas Intermediate for March delivery climbed 8.3 percent to $48.24 a barrel on the New York Mercantile Exchange. [Ref]
FTSE Outlook
Initially today I am going to try a small long around the bottom of the Bianca channels at 6735ish. But with a fairly tight stop! If this area breaks then I expect we will see 6700 for some round number support; then we have the daily 25ema at 6676 – we haven’t actually tested this line since the crossover to bull on 19th January, so that should be a good support area (should!).
On the bullish side we have the daily pivot at 6780 for first resistance, (IG one slight lower at 6770) and then 6800 above that. The top of the 30 minute channel is showing 6808ish and then 6850 above that.
I have gone for an initial rise to at least test the 6800 again today. It will be interesting to see what the bulls do if we do reach that area – keep it going or roll over and get the usual Monday bear kicking in. The S&P is right on its 200ema on daily so does have a bit of support at this 1992 level, out of the FTSE, Dax and S&P it looks the weakest though.