Good morning. Well that was quite a bearish start to the month – it didn’t even manage to reach the pivot at 6708 for the short! However, despite the earlier long at 6655 getting stopped out for a small hit, the later long from 6638 is running well, and having taken some profit, the stop is at breakeven on the rest. I rarely hold trades overnight and certainly not a losing one, but hopefully we will get some more bull this morning! The US tech sector got downgraded by Morgan Stanley yesterday which saw Apple, Facebook and Twitter shares all drop sharply at the open. Apple had $30bn wiped off its value at the open! That dragged the S&P down, which looks like its still on its path to 2042, but is just testing the bottom of the 20 day Raff at the moment.
Asia Overnight from Bloomberg
Oil resumed declines after jumping from a five-year low amid the highest commodity-price volatility in two years. Asian stocks rebounded and South Korea’s won led emerging-market currencies higher.
West Texas Intermediate crude retreated 0.7 percent by 3:14 p.m. in Tokyo, after yesterday’s 4.3 percent surge from its lowest settlement since September 2009. Chinese stockssurged on speculation the central bank will increase stimulus, while mining and energy shares buoyed the MSCI Asia Pacific Index today. The won strengthened 0.6 percent.
The Bloomberg Commodity Index (BCOM), which rebounded off a five-year low yesterday, is swinging the most since October 2012, according to a 60-day measure of historic volatility. Prices for materials and energy plunged, fueling deflation concerns, on concern that supply is outstripping demand as estimates for global growth are downgraded. Australia and India held rates steady before the euro region reviews monetary policy later this week.
“The fall in oil prices is positive for some countries like the U.S. and Japan, but can also be negative for emerging markets, which in turn could cause exports to decline and drag down the global economy,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 39 trillion yen in assets. “In the grand scheme of things, central banks are continuing with stimulus so money is flowing into stocks and is supporting the bottom. While there are many concerns out there, excess liquidity will support the market.”
Rebound Retraced
The drop in oil prices will provide a net boost to the global economy while posing risks for energy-producing nations including Russia, International Monetary Fund Managing Director Christine Lagarde said. The IMF, citing rising geopolitical tension and lower volatility, in October cut its forecast for global growth in 2014 to 3.3 percent and to 3.8 percent next year.
WTI for January delivery dropped to $68.53 a barrel in electronic trading on the New YorkMercantile Exchange. The contract rose to $69 yesterday, retracing a loss of as much as 3.7 percent. Prices have decreased 30 percent this year.
Brent for January settlement was 0.5 percent lower at $72.15 a barrel on the London-based ICE Futures Europe exchange. Oil has collapsed into a bear market amid the fastest rate of U.S. production in more than three decades.
Asia Stocks
The MSCI Asia Pacific Index (MXAP) climbed for the first time in four days. A gauge of energy shares led gains, advancing 1.4 percent after closing yesterday at the lowest since May 2009.BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 3.9 percent and was the biggest support for a subindex of mining stocks, followed by Rio Tinto Ltd.
Hong Kong-listed Chinese brokerages were among the biggest gainers on the Asia-Pacific gauge. China Galaxy Securities Co. jumped 9.3 percent and Citic Securities Co. surged 7 percent amid speculation the People’s Bank of China, which reduced interest rates on Nov. 21, may be preparing to cut banks’ reserve ratio requirements.
China’s benchmark money-market rate fell for a second day as the central bank refrained from draining funds from the financial system.
“It looks like the market has reached consensus that it’s a bull market and fresh capital is flowing in,” Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai, said by phone today. “Brokerages are the biggest beneficiaries because of surging trading values. The possible window for a reserve-requirement ratio cut could be the end of the year or early next year.”
Composite Index
Hong Kong’s Hang Seng Index (HSI) added 0.8 percent after slumping 2.6 percent yesterday, while a gauge of Chinese shares in the city added 2.6 percent following a 2.9 percent rout yesterday. The Shanghai Composite Index increased 2.4 percent and is headed for its highest close since July 2011.
Ping An Insurance Group Co. of China jumped 6.3 percent and was the biggest support for the Hang Seng Index. Jack Ma, the billionaire founder of Alibaba Group, agreed to invest in part of its $4.75 billion share placement, people with knowledge of the matter said.
U.S. equity-index futures climbed after the Standard & Poor’s 500 Index slipped 0.7 percent yesterday. Online shopping rose 8.1 percent on Cyber Monday, slowing from last year as consumers spread their online purchases over more days. Shopping on smartphones and tablets accounted for about 20 percent of e-commerce sales, up from a total of 17 percent the previous year, according to IBM
Won Gains
The won strengthened to 1,106.75 per dollar, according to prices compiled by Bloomberg. The currency fell to 1,119.95 yesterday, the lowest level since August 2013.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling 0.3 percent yesterday, the most in three weeks.
Australia’s dollar strengthened 0.4 percent to 85.20 U.S. cents as the central bank held rates at a record low and reiterated that it foresees a period of interest-rate stability.
The overnight cash rate target was held at 2.5 percent for a 16th month, according to a statement today from Governor Glenn Stevens following a board meeting in Sydney. The decision was predicted by all 30 economists surveyed by Bloomberg News and markets had priced almost no chance of a move. [Ref]
FTSE Outlook
Well initially today I am still running long from 6638 from yesterday so with any luck we will get an initial rise! to 6684 today, though we do have the daily pivot in the way at 6672. 6684 is the top of that 30 minute channel. Above that 6708 and 6732 are the next resistance levels, with the top of the 10 Day Bianca above that at 6762. Support wise, the bottom of the 10 day Bianca is 6655, whilst the bottom of the 20 day Raff is sitting at 6643 – just above the breakeven point on this long. So hopefully the early bull will pull the price away from those supports. 6684 is key though – i have plotted the preferred arrows to break through that, probably on a second test. But if it holds then that 30minute channel is the one to play for and a dip down to 6636 looks likely, and possible a bit lower. Cautiously bullish for today, at least till the US comes online anyway – mainly as we are at the bottom of the longer term 20 day Raffs on FTSE and S&P.