Good morning. A decent morning yesterday with the rise to the 6360/65 area before a sharp leg down to 6303, but then in keeping with the volatility, a rise to 6412. Shame it didn’t quite reach the long area at 6291 though. Still, can’t have it all. Markets are still pretty jittery as it looked like the US was going to have another end of day sell off at one point, but it only saw the FTSE get to 6370. Overnight has hovered around that area. Earning that have come through Ok have been pretty good in the US, J&J, Citi etc have beaten revenue estimates so far. The bad news for the bulls is that we are nearly testing the top of the daily Raff channels with resistance at 6408 and 6445 today.
Asia Overnight from Bloomberg
Asian stocks climbed with the dollar and Brent crude oil rose after its biggest drop in three years. Precious metals slumped.
The MSCI Asia Pacific Index (MXAP)climbed 0.3 percent by 12:56 p.m. in Tokyo, with Japan’s Topix index swinging to a 0.5 percent gain as the yen fell a second day. Standard & Poor’s 500 Index futures were little changed. The Bloomberg Dollar Spot Index climbed 0.1 percent as South Korea cut interest rates to support growth and Chinareported the slowest inflation in four years. Gold retreated 0.4 percent. West Texas Intermediate crude traded at $82.03 and Brent rose 0.4 percent after a 4.3 percent tumble yesterday.
The dollar index has gained more than 6 percent since the end of June as signs of recovery in the world’s biggest economy contrast with data signaling weakness in China, Japan and the euro zone. China reported weaker-than-estimated consumer inflation spurring speculation that the government may undertake further targeted measures to support expansion. Oil is languishing in a bear market, with the International Energy Agency predicting the lowest demand growth since 2009, even as U.S. supplies rise.
“The U.S. is in a much better place compared to its peers,” Stan Shamu, a markets strategist in Melbourne at IG Australia, a unit of IG Group Holdings Plc, said by phone. “The dollar, for now, is enjoying a bit of a recovery. Its major peers — the yen, the pound and the euro — are likely to remain weak.”
Eight out of 10 industry groups in the Asia-Pacific share gauge advanced today. Chinese stocks rallied as the country’s one-year interest-rate swaps dropped to a two-year low a day after the central bank cut the rate on 14-day repurchase agreements for the second time in a month.
Easing Room
The Hang Seng China Enterprises Index climbed 0.8 percent in Hong Kong, where the Hang Seng Index increased 0.7 percent. The Shanghai Composite Index (SHCOMP) rose 0.4 percent and a 2.6 percent surge in a measure of health-care stocks pushed the CSI 300 Index to a 0.6 percent gain.
“The low inflation lays the foundation for further targeted measures to support growth,” said Huang Hai, the Beijing-based deputy head of the research department at SDIC CGOG Futures Co., a unit of State Development & Investment Corp. “Concerns over growth momentum persist, and that can explain why the PBOC cut the rate in repo operations again.”
China’s top economic planning agency is said to have suspended approvals this week for the sale of corporate bonds, deepening a crackdown on corruption and irregularities in the bond market.
FTSE Outlook
We hit the top of the 10 day raff at 6412 yesterday before dropping back, so that level is the first main resistance, though the top of the Raffs are now at 6408 for the 10 day (descending channel so its lower than yesterday) and the 20 day at 6441, however the 20 day Bianca is 6435 and the 10 day Bianca 6458. Basically there is significant daily resistance between 6430 and 6455! I have put in an initial rise on my prediction to that PRT line on the 30min chart at 6395ish, though looking at the 10min chart there is a fairly decent rising channel with resistance at the 6425 area. As per usual when its volatile it makes my job harder! Anyway, presuming it does find resistance on the 30min, I can see a dip to support at 6356, though if that breaks 6325 and 6316 are the supports below. I think 6356 will help for a push up from there, probably to the top of the various daily channels. The main stream media has been getting bearish with various doom and gloom headlines (though not as many as one would like to really flag up the lows being in) so we might see a bit of a bounce. So, I’m still bullish for the moment up to the daily channels really around 6430/50.