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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

FTSE 100 Forecast

FTSE 100 Forecast

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!

Good morning. What an exciting day yesterday – after hitting the short level at 6828 it spent the next few hours doing….. nothing! Interestingly though the S&P has dropped back below the 2000 and the Dax off the 9595 area mentioned in yesterdays email, whilst the FTSE has done nothing. With resistance quite close at 6831 and 6836, its not going to take much bear to break through the supports which we are also on – 6825 pivot and 6811 bottom of the 10 day Bianca channel. Looking at Asia dipping a bit overnight, gold rising and the Dax and S&P also dipping one would tend to favour the bears to have a go.

Asia Overnight from Bloomberg
Japanese and Australian bonds advanced, extending a global rally, while Asian stocks fell. The U.S. dollar weakened against most peers and gold climbed.

Bond yields from Spain to Germany reached all-time lows yesterday amid speculation the European Central Bank is preparing to boost stimulus. Russia said it was watching a build up of NATO troops near its border while the U.S. said Moscow may be directing separatist rebels in Ukraine. Chinese industrial-profit growth slowed to 13.5 percent in July, data today showed beforeGermany reports on inflation and the U.S. updates markets on economic growth.

“The global bond rally has gone a long way in quite a short period of time, obviously driven by Europe and increased speculation over measures from the ECB,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “A discussion over both timing and what exactly those measures are going to be has dominated markets and set the tones for all markets globally.”

Yields on 10-year Australian bonds fell a fourth day, declining to 3.29 percent. New Zealand bonds due in a decade yielded 4.10 percent, down three basis points, or 0.03 percentage point. Ten-year Japanese government notes climbed, with the yield falling to 0.485 percent, the lowest level since April last year.

Spain, Italy
Similar-maturity Treasury rates were little changed at 2.35 percent, after dropping four basis points in New York, while yields on 30-year debt held at 3.10 percent following a six basis-point drop yesterday to the lowest level since May last year.

Rates on 10-year bonds from Spain, Italy, Ireland and Germany dropped to records last session as data showed French factory confidence fell to a 13-month low and a measure of German consumer sentiment slid more than analysts predicted. The reports fueled bets ECB President Mario Draghi may introduce quantitative easing to stimulate growth and ward off deflation.

“Although the Bank of Japan and the Fed will move sentiment in markets globally, we are watching one bank and one bank only: the ECB,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail to clients.

Europe Inflation
Euro-region inflation numbers are due tomorrow, with policy makers next scheduled to review rates Sept. 4. The extra yield on Treasuries over their Group-of-Seven counterparts was 79 basis points yesterday, near the widest margin since June 2007.

Federal Reserve Chair Janet Yellen, who is already paring back unprecedented U.S. stimulus measures, said on Aug. 22 that while slack remains in the labor market, the timeline for rate increases could be brought forward under the right circumstances.

An auction of $35 billion in five-year Treasury notes yesterday drew the highest demand in more than a year from an investor class including foreign central banks as the debt yielded nearly the most in nine years over its German equivalent. A two-year auction earlier in the week drew close to the highest yield in three years amid prospects the Fed may raise interest rates from zero sooner than investors predict.

Regions
The Topix slid 0.5 percent, poised for its biggest decrease since Aug. 8, with almost two shares falling for each that advanced. The Nikkei 225 Stock Average sank 0.6 percent. The yen rose 0.1 percent to 103.75 per dollar after gaining 0.2 percent yesterday.

South Korea’s Kospi reversed an earlier gain to fall 0.1 percent. Samsung Electronics Co. added 0.7 percent.

Hong Kong’s Hang Seng Index increased 0.2 percent, climbing for the first time in three days, while a gauge of Chinese companies in the city fluctuated. The Shanghai Composite Index slid 0.5 percent.

China’s statistics office said industrial-company profits expanded by 13.5 percent in July after a 17.9 percent increase in June that was the fastest rate of growth since September last year. New home-sales data in Australia fell 5.7 percent in July, while the Philippines said second-quarter gross domestic product jumped 6.4 percent from a year before, exceeding the 6.1 percent median projection of economists surveyed by Bloomberg.

Ukraine
Fighting in Ukraine’s eastern regions is spreading to peacefully peaceful areas. A buildup of NATO forces near Russia’s border is unjustified and the country will do whatever is needed to ensure its safety from all threats, Interfax reported, citing Alexander Grushko, Russia’s ambassador to NATO.

Jen Psaki, the U.S. State Department spokeswoman, cited the reports of fresh fighting, telling reporters in Washington yesterday that “these incursions indicate a Russian-directed counteroffensive is likely under way in Donetsk and Luhansk,” cities in the east. Russian President Vladimir Putin’s spokesman, Dmitry Peskov, said that “this information doesn’t correspond with reality.”

The violence in Ukraine expanded a day after Putin met his Ukrainian counterpart, Petro Poroshenko, and hailed the talks as a step toward a political resolution. The government in Kiev said the fighting, which has claimed more than 2,000 lives according to the United Nations, has spread to the shores of the Sea of Azov, effectively opening a new front.

FTSE Outlook

FTSE 100 Prediction

FTSE 100 Prediction

I saw this article in the paper last night with the headline about a 60% market correction. Normally seeing things like that you would expect it to do the opposite for a little bit longer, and climb a bit before any major drops. Will probably be mid September before it gets very bearish! However, as I mentioned above it does look like it might be a little bit bearish today. We shall see. The S&P hasn’t really done much since dipping from the 2006 level, the Dax dropped off the 9595 area and gold is ticking ups bit. With supports close by on the FTSE with the pivot at 6824, and the 10 day Bianca at 6811, we may see a little bounce off that initially, but there are pretty strong resistance levels at 6831, 6834 and 6844, so I am favouring a dip for today, probably after an initial bounce off the 6811 support. If 6811 breaks then I can see it dipping to 6750 today.

If you are still holding 6828 short from yesterday, Id probably continue to hold, or enter new shorts at 6831/6835 area.

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