Good morning. We, and professional traders too, earn the money on days like that – carnage would sum it up quite well, as the prices just scream all over the place. It was such a big fall on the FTSE that even a 100 point bounce in the evening looked little more than a small bump on the chart. I had hoped that it was going to perfectly hit the Raff channel I emailed round last night at 6140 but instead bounced from just above at 6150. The way the S&P lead the charge definitely looked like the Plunge Protection Team (PPT) stepped up the plate. We are just above the Bianca channels for the moment, at 6211 and 6186, so we may see a little bit of a relief rally before more downside.
Asia Overnight from Bloomberg
Asian stocks slid toward a six-month low and average bond yields for the biggest developed economies fell to a record on concern that Europe’s economic woes may scupper the global recovery. Crude oil extended declines as South Korea’s won led emerging-market currencies higher.
The MSCI Asia Pacific Index sank 0.9 percent by 12:49 p.m. in Tokyo, as most major Asian benchmark gauges retreated.Japan’s Topix index dropped 2 percent. Standard & Poor’s 500 Index futuresadded 0.3 percent after the U.S. gauge fell to a six-month low. The won gained 0.3 percent. Japan’s 10-year bond yield dropped and Treasuries rose an eighth day as investors pushed out the estimate for when the Federal Reserve will raise rates. Oil in New York fell 1.3 percent to $80.75.
Euro-area inflation data is due today after the region’s stocks tumbled, Greek bonds plunged and Germany cut its growth forecast, stirring memories of the bloc’s sovereign-debt crisis. Asian bond risk surged. A bigger-than-projected drop in U.S. retail sales ignited concern over the impact of the global slowdown on the world’s biggest economy.
“There’s been a significant correction in U.S. equities and that’s shaken investor confidence,” Toby Lawson, head of futures, options and cash equities trading for Asia-Pacific at Newedge Group SA in Sydney, said by phone. “Geopolitical risks and the spread of Ebola are adding to global economic uncertainties. When the market is a state of flux, everything gets amplified.”
The S&P 500 ended last session down 0.8 percent, paring a drop of as much as 3 percent that briefly wiped out its gain for the year. Europe’s benchmark stock gauge plunged 3.2 percent, its biggest retreat in almost three years, and finished the day 11 percent below a June high, meeting the common definition of a correction.
Asia Stocks
The Asia-Pacific gauge is heading for its lowest close since March 25, and is down more than 9 percent from a July 29 high. The MSCI Emerging Markets Index fell 0.2 percent today.
All 33 industry groups on the Topix dropped today. The broadest measure of Japanese equities is 11 percent below its recent peak. The Nikkei 225 Stock Average slid 1.9 percent today as a gauge of options prices on the measure surged 14 percent to the highest since March.
Hong Kong’s Hang Seng Index dropped 0.5 percent and a gauge of Chinese shares in the city pared its loss to 0.1 percent. The Shanghai Composite Index climbed 0.6 percent and the CSI 300 Index also added 0.6 percent, buoyed by a surge in healthcare stocks amid heightened concern about the spread of the Ebola virus.
Treasury Surge
The average 10-year yield across the U.S., Germany and Japan fell to 1.1 percent, the lowest on record and down from 1.9 percent at the end of 2013.
The rate on Treasuries (USGG10YR) due in a decade fell four basis points to 2.10 percent today and Japanese 10-year bond yields fell to 0.475 percent. That’s the lowest since April last year, when the Bank of Japan unleashed an unprecedented prgram of monetary stimulus.
A measure of Treasury volatility jumped the most since September 2008 yesterday. Bank of America Merrill Lynch’s MOVE Index, which measures price swings based on options, climbed 26.64 basis points to 101.28 basis points.
Trading volume in U.S. Treasuries surged to the highest on record as investors dropped wagers that the Federal Reserve Will raise interest rates. More than $945 billion in U.S. government debt changed hands, according to ICAP Plc, the World’s largest interdealer broker. That surpassed the $662.2 billion traded on May 22, 2013, when former Fed Chairman Ben S. Bernanke mentioned the possibility of slowing bond purchases.
WTI, Brent
The yield on China’s sovereign bonds due September 2024 fell five basis points to 3.9 percent as of 10:46 a.m. in Shanghai, prices from the National Interbank Funding Center show. The benchmark 10-year yield dropped yesterday to the lowest level since August 2013, according to ChinaBond data.
Aggregate financing totaled 1.05 trillion yuan ($171 billion) last month, hitting a three-month high while missing the median estimate of 1.15 trillion yuan in a Bloomberg News survey, according to data released today by the People’s Bank of China.
West Texas Intermediate oil declined after ending last session down 0.1 percent at $81.78, its lowest settlement since June 2012.
Brent for November settlement, which expires today, declined as much as 71 cents, or 0.9 percent, to $83.07 a barrel on the London-based ICE Futures Europe exchange. The more-active December contract was down 70 cents at $83.42.
Bank of America Corp. and BNP Paribas SA predict prices will hold above $80 a barrel. Commerzbank AG also sees that level as a possible low for Brent crude. They’re in part counting on OPEC cutting output — some say as soon as next month — to compensate for recent declines in demand.
FTSE Outlook
What a day, haven’t seen just declines on the FTSE for a long time. Certainly a lot of fear out there over global economies, especially following poor US data; but that said company earnings that are coming through this week are not too bad. Todays pivot is 6276 so whilst I think we might see that today I do think we are about to get another leg down before a decent bounce. Looking at the S&P, down to 1835 maybe, then bounce to 1900? Ebola is still hovering as an issue too, with a rumour going round yesterday afternoon that Barcelona airport was in lock down after several symptomatic passengers arrived. Jitters all round then. Anyway, for today I think we might have a little continuation of that bounce from last night, a bit of consolidation then more downside, maybe tomorrow. There are quite a few resistance levels mention int he headline at the top of the email – thats the problem when it s bait chaotic, it puts the levels a bit all over the place. So, after an initial rise to the pivot, a possible dip from there (6288 is also resistance so this whole area). If it retests that area then we might get a rise to 6305, where we have the top of the 30 minute channel, and a good spot to go short again. If the bears really start, helped by the US then we could get further declines off that to the bottom of that channel around 6060, which might well tally with the S&P hitting 1837 where there is support.