Good morning. Wow what a day that was yesterday. My 2 early shorts got stopped out but the one off the 6353 pivot ended up seeing a drop to 6120 during the evening session. Mondays have been bearish recently but not that bearish! Anyway, got a nice email from a member who closed their short for 200 points, I unfortunately didn’t hold that long! Anyway, that price action yesterday has broadsided the FTSE and it looks pretty weak still. Santa will have his work cut out over the next few sessions if he is going to make an appearance… With oil showing no sign of slowing down its drop and lone wolf terrorist attacks cropping up, things are quite jittery. Bulls still need to break above 6385 to slow the drops down, 6450 to change the tide. One flag that all isn’t quite so bad is that gold is dropping – a traditional safe haven that you would expect to be climbing each day.
Asia Overnight from Bloomberg
Asian stocks fell, with the regional index at a two-month low, and the yen rallied as oil’s slump and shrinking Chinese manufacturing stoked concern the global economy may falter. Ruble forwards jumped after interest rates were raised by the most since 1998.
The MSCI Asia Pacific Index (MXAP)slipped 0.8 percent by 1:55 p.m. in Tokyo, as benchmarks in Tokyo, Hong Kong, Jakarta andSingapore plunged more than 1 percent. The yen strengthened 0.6 percent toward a one-month high versus the dollar as the yield on 10-year U.S. notes fell two basis points. Oil in New York fell a fifth day, sinking 0.6 percent. One-month Russian ruble forwards jumped 6.3 percent versus the dollar. Indonesia’s rupiah erased losses amid speculation the central bank intervened to stem losses.
Energy companies are driving a retreat in global stocksas increasing crude output coincides with declining demand amid slowing global growth. A preliminary index of Chinese purchasing managers signaled contraction, according to HSBC Holdings Plc and Markit Economics. The Bank of Russia raised its key rate by 6.5 percentage points to support the ruble. The U.S. Federal Reserve starts its two-day monetary policy review today.
“It’s a flight to quality,” said Wontark Doh, head of overseas fixed-income investment in Seoul at Samsung Asset Management, which has $121.9 billion in assets. Russia’s “tightening of monetary policy caused volatility in global markets. U.S. Treasuries are the beneficiary.”
‘Considerable Time’
Standard & Poor’s 500 Index futures were little changed, paring a gain of as much as 0.3 percent, after the U.S. gauge swung to a drop of 0.6 percent. The U.S. central bank will consider whether to retain a pledge to keep rates near zero for a “considerable time” after they ended their bond-buying program in October.
A gauge of energy companies in the MSCI Asia Pacific Index fell 28 percent from a Sept. 4 high for the year through yesterday. Santos Ltd., an Australian oil producer, and Malaysia’s SapuraKencana Petroleum Bhd have led the slide, plunging 51 percent in the period. Santos was 2.6 percent lower today while SapuraKencana was little changed.
Hong Kong’s Hang Seng Index retreated 1.4 percent and the Hang Seng China Enterprises Index sank 0.8 percent. The Shanghai Composite Index (SHCOMP) added 1 percent as brokerages climbed on speculation the factory gauge at a seven-month low means further stimulus will be forthcoming.
Flash PMI
The so-called flash manufacturing purchasing managers’ index from HSBC Holdings Plc and Markit Economics fell to 49.5, while economists surveyed by Bloomberg projected a reading of 49.8 for December, from 50 last month. It’s the first time since May that the gauge has slipped below 50, the threshold between expansion and contraction. A similar gauge of Japanese factory activity is also due today.
“The China PMI falling below 50 is bad,” said Will Yun, a commodities analyst at Hyundai Futures Corp. in Seoul. “It is a signal that there is worse to come. It gives more reason for the Chinese government to use stimulus.”
Japan’s Topix index retreated 1.9 percent, Australia’s S&P/ASX 200 Index dropped 0.7 percent in a sixth straight day of declines, while the Kospi index in Seoul fell 0.9 percent.
The MSCI Emerging Markets Index fell 0.5 percent, sliding an eighth day for the longest losing streak since September. The Jakarta Composite Index slumped 1.9 percent, while Singapore’s Straits Times Index and Thailand’s benchmark gauge tumbled 2 percent.
WTI, Brent
West Texas Intermediate crude fell to $55.59 a barrel in New York, headed for its lowest settlement since May 2009. The U.S. benchmark contract is down 43 percent this year. Brent crude for January settlement lost 0.8 percent to $60.60 a barrel in London, also a five-year low.
The yen strengthened to 117.24 per dollar after surging 0.8 percent yesterday, while the euro advanced 0.2 percent to $1.2461. Norway’s krone climbed 0.5 percent.
Australia’s dollar added 0.3 percent to 82.32 U.S. cents after the central bank reiterated that it expects a period of stability in interest rates, which are at a record low.
The Bloomberg Dollar Spot Index dropped 0.2 percent. Yields on 10-year U.S. Treasuries fell two basis points, or 0.02 percentage point, to 2.10 percent, dropping for the sixth time in seven sessions.
Offshore prices showed the ruble climbing 6.7 percent for the first advance in seven days, after sliding beyond 60 per dollar yesterday. The country’s central bank, which has been trying to stem the currency’s tumble through intervention, boosted the key rate to 17 percent from 10.5 percent, the largest single increase since 1998, when Russian rates soared past 100 percent and the government defaulted on its debt.
‘They’re Panicking’
One-month forwards on the currency, whose prices partly reflect interest-rate differentials, surged percent to 62.7 per dollar after sinking 11 percent yesterday. The Market Vectors Russia exchange-traded fund rose about 3.5 percent in after-hours trading in New York.
“They are throwing darts in the dark,” Slava Rabinovich, chief executive officer at Diamond Age Capital Advisers in Moscow, which manages $240 million in Russian assets, said by phone. “They are panicking. The ruble will spike back up, but the spike is going to be very short-lived.”
FTSE Outlook
With these drops the EMAs on the daily are now bearish and any rise to the 25EMA (currently at 6518 today) would be a good short for a swing trade for further downside, as the way things look at the moment we may be on for sub 6000 soon. any possible Santa rally might well get the price to that level but then further downside ensues.
Not that i think it has that much significance but last years Santa rally started on the 16th December after a grotty start to the month, so something to bear in mind. 6150 is the bottom of the 10 day Bianca channel today as well as the bottom of the 30 minute channel you can see below, so we may get a bit of a bounce there. If not then a drop to 6115 (most recent low) looks likely, with 6063 and 5990 the supports below that. Resistance wise, we have the daily pivot at 6240, a point that I think we might test first before dropping to the 6150, and above the pivot the top of the 30minute channel at 6305ish. If the bulls were to start a charge today and break that then 6385 is the top of the 10 day Bianca. After such a bearish day today the bulls will have their work cut out and will need 6445 to reverse the declines, allowing a rise to 6535 and 6600. Still short the rallies looks the safest play, especially around that 25ema on daily.