Good morning, I hope you had a good weekend. Now that the Scotland vote is out the way the political fall out continues in Westminster, with Labour wanting to keep the Scottish vote for their MP’s otherwise they are going to suffer. Been pretty bearish since the rise on the No vote,dropping nearly 100 since the peak, as we are at 6812 as I write this. I read a very bearish article over the weekend that would certainly put you off investing in equites, and in the mainstream press too – here. Going to be interesting this week, its looking fairly bearish with the S&P tumbling off that 2022 area it hit on Friday, and looking to be heading to 1980, its currently at 2002. 20 point drop in very short order will get the bulls spooked…
Asia Overnight from Bloomberg
Asian stocks fell, led by Hong Kongshares, and U.S equity-index futures tumbled with commodities amid speculation China may accept slower growth. Bonds rallied after officials from the world’s biggest economies warned of rising financial risks, and silver plunged.
The MSCI Asia Pacific Index dropped 0.6 percent by 1:19 p.m. in Tokyo, as theHang Seng Index retreated 1.3 percent on elevated trading volume. Standard & Poor’s 500 Index futures lost 0.5 percent. SoftBank Corp. drove Japanese shares lower. The yen climbed 0.2 percent as yields on government bonds from the U.S., Japan and Australia slid. South Korea’s won rebounded from a five-month low. Silver slumped with copper and nickel in London and Brent oil slid 0.5 percent.
China’s Finance Minister Lou Jiwei said growth in Asia’s largest economy faces downward pressure and reiterated that there won’t be major changes in policy in response to individual economic indicators. Group of 20 finance chiefs and central bankers said low interest rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth. U.S. housing data is due today.
Lou “gave a real hint that the recent policy easing may actually be quite limited,” Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong, said by phone. “We’re not just going to see this wall of money thrown at the Chinese slowdown.”
The Hang Seng Index is heading for its lowest close in about two months as the number of shares traded surged about 50 percent compared with the 30-day average for the time of day. A gauge of Chinese companies listed in Hong Kong slipped 1.8 percent in a third straight retreat. The Shanghai Composite Index fell 1.5 percent.
Flash PMI
The Hang Seng China Enterprises Index (HSCEI) slipped 2.1 percent last week to the lowest level since July. A preliminary reading on the HSBC Holdings Plc/ Markit Economics China manufacturing purchasing managers’ index is due tomorrow, with economists surveyed by Bloomberg predicting a drop to 50, from 50.2 in August.
China’s economy is growing in a stable way and operating within a reasonable range, Finance Minister Lou said in a statement published on the People’s Bank of China website. Macroeconomic policy will focus on “comprehensive” targets, particularly job growth and price stability, the statement said.
Australia’s S&P/ASX 200 Index (AS51) fell 1.2 percent, while the Kospi index in Seoul slipped 1 percent. China is the biggest trading partner for both countries and the world’s largest consumer of industrial metals.
Rates, Risk
The Fed will keep interest rates near zero for a “considerable time” after asset purchases are completed, most likely next month, it said last week as officials raised their median estimate for the federal funds rate at the end of 2015.
G-20 officials said yesterday in a communique released in Cairns, Australia, that they “are mindful of the potential for a build-up of excessive risk in financial markets, particularly in an environment of low interest rates and low asset price volatility.” The ministers welcomed signs of strength some key economies, but noted “growth in the global economy is uneven.”
FTSE Outlook
We have the bottom of both the 10 and 20 day Bianca channels at 6765 and 6769 so I expect if we get a dip to that area to see a bounce from there, which looks likely now we have moved below 6830. Todays pivot is 6844, and there is some initial support here at 6810, being the 25ema on daily. I don’t think it will be seen today but a move above 6900 still targets that 6936 area, with 6950 above that. We have the bottom of a rising ProTrend channel on the 30 minute showing support at 6790 so if this initial drop continues can see a small bounce there, probably to the 25ema rather than the pivot, before further downside to that 6765/6769 area. I do think we will get a decent bounce there (bottom of 10day Raff and the Bianca channels too), and maybe that level will coincide with the 1980 S&P level later.