Good morning. Well fortunately the short came good yesterday, so less the divi hit of 11 points having held over the close on Tuesday, still managed to bag a few points. The FTSE had a decent bounce from the 6740 level – it looked like it was going to as the S&P didn’t follow the FTSE down, and in fact started to break above 1982 as the FTSE hit 6740. Initial resistance is 6791 today, then above that the top of the Bianca 10 day at 6820 looks possible. Last night the Fed brought up the subject of earlier than expected interest rate rises, maybe this year, when their July meeting minutes were released. And just after the BoE said they won’t till next year! “Many participants noted that if convergence toward the [Fed’s] objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated,” the minutes said.
Asia Overnight from Bloomberg
Asian stocks outside Japan fell for the first time in nine days after a private gauge of Chinese manufacturing dropped more than economists forecast.
The MSCI Asia Pacific excluding Japan Index slid 0.7 percent to 509.25 as of 11:08 a.m. in Hong Kong, with five shares falling for each two that rose. The measure closed yesterday at a more than six-year high.
“China is still in a recovery mode, but the momentum has slowed,” Wang Tao, a Hong-Kong based head of China economic research at UBS AG told Bloomberg TV. “The summer rebound is taking a breath. The recovery is still on track, but it is not that strong.”
The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.3 in August, trailing all 22 estimates in a Bloomberg News survey of economists and missing the 51.5 median forecast. The measure dropped from July’s 51.7 and was at a three-month low. Numbers above 50 indicate expansion.
Regional Gauges
South Korea’s Kospi index fell 1.2 percent and Hong Kong’s Hang Seng Index lost 0.9 percent. The Hang Seng China Enterprises Index of mainland stocks traded in the city dropped 1.5 percent and the Shanghai Composite Index fell 0.7 percent. Taiwan’s Taiex Index retreated 0.3 percent.
Japan’s Topix index advanced 0.7 percent, while Australia’s S&P/ASX 200 Index (AS51) rose 0.2 percent. New Zealand’s NZX 50 Index gained 0.3 percent. Singapore’s Straits Times Index added 0.1 percent.
The drop in the Chinese manufacturing follows a slump in credit expansion and slowing growth in investment spending in July. While the People’s Bank of China has signaled it will maintain a “prudent” policy stance, any further deterioration this quarter may force a looser setting.
“There’s no question the market was looking for something better, so that’s disappointing on a one-month basis,” Martin Lakos, a Sydney-based division director at Macquarie Private Wealth, said by phone. “We’re not overtly concerned about week-by-week or month-by-month numbers. Holding above 50 is still expansionary, but probably not necessarily where we’d want it to be. The longer-term trend on PMIs is still very positive.”
Fed Minutes
The Federal Reserve yesterday released minutes of its July meeting in which officials raised the possibility they may end aggressive stimulus sooner than anticipated while acknowledging continued slack in the jobs market. The Fed is on pace to wind down its monthly bond purchases in October, and intends to keep the benchmark interest rate low for a “considerable time” after that.
Futures on the Standard & Poor’s 500 Index added less than 0.1 percent today after the gauge yesterday rose 0.3 percent to close within two points of a record high.
Traders saw a 52 percent chance the Fed will increase its benchmark interest rate to at least 0.5 percent by July 2015, futures contracts showed. That compared with a 48 percent likelihood the previous day. The rate has been near zero since December 2008.
Jackson Hole
Weak wage growth and low inflation have given the Fed room to hold rates near zero for even as growth shows signs of accelerating. There was no discussion of the timing of a rate increase in the Fed minutes, though officials have forecast that it would occur some time next year.
Fed Chair Janet Yellen will address global central bankers this week in Jackson Hole, Wyoming. Policy makers including European Central Bank President Mario Draghi will also speak.
FTSE Outlook
Despite an initial bounce off the pivot for 10 or so, the bears came back quite quickly to drive prices lower. The pivot long didn’t really work yesterday as such though the short covered most of the action. After a V shaped day and with the S&P still rising, we “should” get a bullish day today, with S&P targeting 1989 and 1994 initially. That should carry the FTSE to the top of the Bianca channel at 6820 – so worth a short there I reckon. The violence int he Middle East is flaring up with yesterday’s events – it must be serious as the PM cut short his holiday!
We are sat just above todays pivot as I write this, 6758, so if that holds as support initially the bulls will be able to reach 6791 as the first stop.The Daily EMAs have crossed over to bullishness now, so we may see a bit more upside from here. After all, with all that fear the other week, if the bears were going to really go for it then that was their chance. Bottom line is that too many trillions (whats the next one up from that, gazillions?!) have been pumped into the markets and global economies for it to wobble and make that look like a waste of money. Above 6791 we have 6820 top of 20 day Bianca. We are still nudging the top of the longer twerp daily Bianca channels, 6793 for both the 50 day and 20 day, so a short at 6791 might be worth an initial go, otherwise that rising 30 min channel should lend support today.