Good morning. Started off well with the dip and then started to bounce off our 6811 support long area… till news broke that the Russians had invaded Ukraine! That said, it was all quite flat despite the initial dip as found support at the 6800 area and then trod water for the rest of the day. The Dax obviously wasn’t as happy, shedding a fair few, as well as the S&P which bottomed at 1990. But its now back above 2000 (just!) as I write. Bearish articles now appearing in the press so a bit higher yet I think, though the worm seems to be turning properly in favour of buyers in the UK housing market, having started in mid August.
We have the Eurozone CPI out at 10am today, and then at 13:30 the US releases the Personal Consumption Expenditure, forecast at 1.5%. Both likely to move the market a bit at those times. Also note the US has Labor day holiday on Monday, 1st September.
Asia Overnight from Bloomberg
Asian stocks fell, with the regional benchmark index headed for its first monthly decline since April, led by materials and consumer shares.
The MSCI Asia Pacific Index (MXAP) lost 0.2 percent to 147.99 as of 9:32 a.m. in Hong Kong as five shares declined for every three that rose. The gauge is set for a 0.6 percent drop this month and a 0.3 percent weekly slide. The Standard & Poor’s 500 Index retreated back below 2,000 yesterday as violence in Ukraine and disappointing retail earnings outweighed data showing the U.S. economy expanded more than previously estimated last quarter.
“Geopolitical risk reared its ugly head yet again,” said Stan Shamu, a Melbourne-based market strategist at IG Ltd. “News that Ukraine-Russia tension is flaring up again sharply spooked investors. The negative at play for Japanese equities at the moment is the fact safe-haven flows favoring the yen might put on pressure as geopolitical risk escalates.”
Japan’s Topix index sank 0.4 percent as the nation’s currency held two days of gains, trading at 103.71 per dollar. Core consumer prices increased 3.3 percent in July from a year earlier, holding at the same pace as June and meeting analysts’ estimates, a report showed.
Regional Gauges
Hong Kong’s Hang Seng Index (HSI) was little changed and Hang Seng China Enterprises Index slipped 0.2 percent. The Shanghai Composite Index added 0.1 percent. Australia’s S&P/ASX 200 Index added 0.1 percent and South Korea’s Kospi index lost 0.3 percent. New Zealand’s NZX 50 Index, Taiwan’s Index and Singapore’s Straits Times Index all fell 0.2 percent.
Ukrainian President Petro Poroshenko pledged to step up the country’s defenses as rebels widened their offensive. The U.S. said Russia may be directing attacks by separatists, souring investor sentiment that improved in recent weeks on optimism that Russian President Vladimir Putin would take steps to de-escalate the conflict that’s claimed more than 2,000 lives.
US Futures
Futures on the S&P 500 added 0.1 percent today after the U.S. equities benchmark index yesterday dropped 0.2 percent. The world’s biggest stock market is seeing the slowest trading in at least six years as investors leave for vacation before the Labor Day holiday.
U.S. Growth
The U.S. economy expanded more than previously forecast in the second quarter, propelled by the biggest gain in business investment in more than two years. Gross domestic product rose at a 4.2 percent annualized rate, up from an initial estimate of 4 percent and following a first-quarter contraction, Commerce Department figures showed yesterday.
Other reports showed contracts to purchase previously owned homes rose more than forecast in July. The number of Americans filing for unemployment benefits was little changed last week, near the lowest level in seven years.
“On a 12-month view Asian stocks will do very well, though in the short term we’re heading up against some resistance levels here,” Steve Brice, Singapore-based chief investment strategist at Standard Chartered Plc, told Bloomberg TV. “We still think market sentiment is going to remain pretty well supported. The main risk for equity markets in the short term is a melt-up scenario. That’s not really changed by fundamental factors or geopolitical factors.”
FTSE Outlook
Was bearish yesterday as expected but didn’t get as low as the 6775 area in the end, finding support at the 6800 instead. We have todays pivot at 6811 which we are just below, whilst the bottom of the 10 day Bianca has moved up to 6803. As such we may get a decent bounce form this area, to the same resistance levels that we had for yesterday – 6831, 6841 and possibly 6855. We have the top of the 30 minute channel currently at 6839 so I think longs to there will be good then flip to short for today. I expect the bulls will break through the 6811 pivot, though won’t push on too high today as with the US closed on Monday, and going into the weekend, traders will most likely take some profit off the table. S&P might well hold above 2000 today to end the month quite strongly. Good for the stats!