Good morning. Wow, I mentioned 6440 area as support of it all went pear shaped for the bulls, as it was the bottom of the Bianca channels for yesterday but didn’t actually think it would get hit! Would have loaded up massive shorts if I had! Was one of those pain in the behind trending days yesterday (unless you are already on the move and just run it with a trailing stop). The drop was on a reduction of the global growth estimate (with a bit of Ebola worry thrown in too!), though the International Monetary Fund says the UK will be fastest growing economy in G7 this year, though rising house prices in Britain are a concern. The drop on equities did mean that gold managed to hold above 1200 though. 6430 is support today, but it does still look poretty bearish and the bottom of the Raffs extend down to 6317 for today.
Asia Overnight from Bloomberg
Asian stocks dropped, extending a global selloff, and oil dropped amid concern that the global economic outlook is worsening. Treasuries fell and Standard & Poor’s 500 Index futuresrose with the dollar before the Federal Reserve releases minutes of its last meeting.
The MSCI Asia Pacific Index fell 1.1 percent by 12:49 p.m. in Tokyo, as Japan’s Topix (TPX) index dropped toward a seven-week low. The Shanghai Composite Index added 0.3 percent and China’s yuan was little changed after a week-long holiday. S&P 500 futures rose 0.2 percent after the U.S. gauge’s lowest close in almost two months. Ten-year Treasury yields rose two basis points after tumbling yesterday and the dollar gained against most peers. Gold rose 0.3 percent while Brent crude was near a two-year low.
The Federal Reserve releases minutes of its last meeting as Alcoa Inc. will report earnings amid reduced estimates for profit growth at U.S. companies. A gauge of China’s services industries fell as markets there reopened after being closed for a holiday since Oct. 1. European Union leaders meet in Milan today to discuss fiscal policies after the IMF cut its global growth forecast yesterday and warned about risks posed by geopolitical tensions and “frothy” stock markets.
“The global economic recovery has proved yet again to be fragile and uneven,” Shane Oliver, a global strategist at AMP Capital Investors Ltd., which oversees about $131 billion, said by e-mail in Sydney. “The rough patch we have seen in shares lately could go a bit further.”
The Topix slipped 1.5 percent, set for the lowest close since Aug. 18, as the Nikkei 225 Stock Average retreated 1.4 percent. The yen, regarded as a haven by some investors, dropped 0.3 percent to 108.37 per dollar after gaining 1.6 percent over the past two days.
South Korea’s Kospi index was little changed and the S&P/ASX 200 Index in Sydney lost 0.9 percent.
Hong Kong
Hong Kong’s Hang Seng Index retreated 0.7 percent as the Hang Seng China Enterprises Index declined 0.9 percent. The enterprises gauge, which tracks mainland Chinese stocks listed in the city, gained 1.5 percent in its three trading days since Sept. 30, with pro-democracy protest leaders agreeing to start talks with the government Oct. 10, even as blockades remained on Hong Kong’s streets.
The MSCI All Country World Index dropped 1.9 percent while China’s markets were closed. The HSBC Holdings Plc/Markit Economics China services purchasing managers index fell to 53.5 in September from 54.1 a month before. An official non-manufacturing gauge for the country released Oct. 3 dropped to 54 for September from 54.4 in August.
IMF Report
Growth in the U.S. is helping lead a worldwide acceleration that’s weaker than the IMF predicted 2 1/2 months ago, the Washington-based lender said yesterday as cut its growth outlook to 3.8 percent for 2015, from 4 percent. Some financial markets may be overheating after a sustained period of near-zero rates, according to the report.
“Downside risks related to an equity price correction in 2014 have also risen, consistent with the notion that some valuations could be frothy,” the IMF said without naming specific markets.
The S&P 500 dropped 1.5 percent yesterday, while the Nasdaq Composite Index slid 1.6 percent. The Russell 2000 Index of smaller companies lost 1.7 percent yesterday, the most since July 31. The Dow Jones Industrial Average slid 1.6 percent, also the steepest one-day loss since July.
The MSCI All-Country World Index declined 0.2 percent today after sinking 1 percent last session to its lowest level since April 15. A gauge of emerging-market equities sank 0.5 percent. Shares in Jakarta declined, with the benchmark index there dropping 0.8 percent.
Fed
The Federal Open Market Committee is due to release minutes of its Sept. 16-17 meeting later today. Investors have been concerned the central bank may increase interest rates sooner than anticipated as the U.S. economy gains strength.
Forecasts for the Fed to raise key rates in mid-2015 are “reasonable” as policy makers wait for unemployment to fall further and inflation to accelerate, New York Fed President William C. Dudley said in a speech in Troy, New York.
FTSE Outlook
The bulls need to break 6485 to have any hope of pushing higher today, with the daily pivot at 6518 being the next resistance. A long at 6492 to target that pivot and 6530 might be fruitful if we get a bit of a dead cat bounce today – it has risen ok overnight from that 6440 area after all. The bulls have failed to break the 10ema on daily on 3 occasions since the cross to bearish on the daily chart, which is now at 6550 – this level will be the one the bulls need to break to cancel the immediate threat of further downside (the 10 day Bianca channel top is 6556 so 2 main resistance levels here), though 6641 being the 25ema on daily will likely see more selling pressure. Big picture then still looks weak, with the Raffs at 6315, and the Bianca channels at 6400, levels that it probably wouldn’t be surprising to see now! The bulls can still salvage October for a stronger ending though.
So, for today… Looking at 6485 as resistance for a dip to 6430. If the bulls break 6485 then 6518 and 6530 are resistance, with 6550 above that. If 6430 breaks then 6401 (10 day Bianca) and 6320 (Raffs).