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Tuesday 28th of January Market Report

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Tuesday 28th of January 2014 as of 12:00 CET

S&P 500 futures are up 9 points at 1784.75 and Dax is up 43 points at 9416.50. We tested key support levels in both the S&P 500 (1767) and the Dax (9320) yesterday and so far these have held up and we might get a bounce going into tomorrow’s FOMC decision. Any indication by the Fed tomorrow that tapering is pushed back could trigger another rally back above 1800 in S&P500.

In Asia: Risk sentiment still strained, however equities manage to pare back some of its intraday losses. Volumes were up vs. the 10, 20 and 30dma's with good flow across sectors. Utilities and Industrials squeeze out gains of 0.18% and 0.15%, but most of the sectors post losses to open the week. Technology and Health Care lag, -0.86% and -0.82%, respectively. Apple earnings exceed estimates, but the stock traded down almost 6% after-close as iPhone sales disappoints.

G10 flows were light overnight, EUR closing flat after trading in a very tight 20 pip range throughout the NY session. USDJPY traded to a low of 101.77 yesterday on Nikkei weakness before rallying to end at 102.55. GBP and AUD outperform slowly but steadily, both up +0.60%.

Treasuries sold off to start the week with 10s closing 3bps weaker and 2y1y off by 5.5 bps. Commodities were broadly in the red overnight as gold drifted lower consistently throughout the day falling 1.40% in spot. Both WTI and Brent fell under pressure, down 0.99% and 1.06%, respectively. 

 

ICBC Offers Clients Option to Recoup Funds From Trust (BN)

-------------------

From Bloomberg News: “Industrial & Commercial Bank of China Ltd. said investors in a troubled high-yield trust can recoup their funds, averting a threatened default that underscored concern over the shadow-banking system and helped spur a selloff in emerging-market currencies and stocks. Rights in the 3 billion-yuan ($496 million) product issued by China Credit Trust Co. can be sold to unidentified buyers at a price equal to the value of the principal invested, according to one investor who cited an offer presented by ICBC and asked to be identified only by his surname Chen. China Credit Trust earlier said it reached an agreement for a potential investment and asked clients of ICBC, China’s biggest bank, to contact their financial advisers.”

China details $3-trillion local public debt risk (Reuters)

-------------------

From Reuters News: “China's local governments have published separate audit reports detailing their combined public debt of $3 trillion for the first time ever, to increase transparency and quell investor concerns. The audits showed China's wealthiest eastern provinces are the most indebted, though repayment burdens are more onerous in poorer areas such as the southwestern province of Guizhou, where the ratio of debt to GDP is the highest, at 79 percent. Most governments were shown repaying the vast majority of their debt on time, though a handful, such as Inner Mongolia, have fallen behind, with the portion of loans due but unpaid running as high as 28 percent.”

Fed Would Need to Reveal More on Bank Oversight Under Bill (BN)

-------------------

From Bloomberg News: “The Federal Reserve would have to disclose more about supervision of the biggest, riskiest banks under legislation aimed at increasing Fed accountability introduced by Representative Scott Garrett, a New Jersey Republican on the House panel overseeing the central bank. The bill would require the Fed to perform a cost-benefit analysis of any new banking rule and disclose more about bank stress tests. The Fed vice chairman would have to testify on financial rule-making if the post of vice chairman for supervision remains unfilled, and the Fed Board would need to release to Congress its internal audit of supervision and regulation.”

ECB's Weidmann: People Must Trust We'll Preserve Our Mandate (WSJ)

-------------------

From WSJ: “European Central Bank governing council member Jens Weidmann said Monday it is important that citizens know the ECB will uphold its mandate and raise rates at the right time to stop potential inflationary dangers. Speaking at a public question-and-answer session sponsored by a local newspaper, Mr. Weidmann countered criticisms of low interest rates, namely that they hurt savers, noting the advantages of low interest rates, such as cheap building financing and low financing costs for public budgets. These are "different facets of the same situation," he said.  "What is important to me is that citizens can rely on us" to maintain the stability of money and that the central bank would react to raise interest rates when necessary, he said.”

Euro zone examines faster fund for bad banks (Reuters)

-------------------

From Reuters News: “The euro zone may reopen the debate on how soon it will share the costs of winding down banks after a European Central Bank call to accelerate the move towards mutual support won some backing. The European Union's blueprint to close failing banks depends on a 'resolution' fund, into which banks are to pay roughly 55 billion euros ($75 billion) over 10 years. The money would be used to finance the closing down of insolvent lenders, but initially, in case of a bank wind-down, each country could only use the amount of money that its own banks contributed. With each year, euro zone countries would gradually share more and more money from their funds until all the funds are shared after a decade.”

U.K. Seen Growing Most Since 2007 as Carney Primes Phase Two (BN)

-------------------

From Bloomberg News: “Britain’s economy probably capped its best year of growth since 2007 during the last quarter, bringing Mark Carney closer to completing what he calls the “first phase” of his low interest-rate policy. Gross domestic product rose 0.7 percent, near the 0.8 percent pace of the previous three months, according to the median of 39 estimates in a Bloomberg News survey. The data due tomorrow would mark the first full year since the financial crisis when the economy sustained expansion in every quarter. Carney, the Bank of England governor, repeated at the weekend that he wants exceptionally loose monetary policy for some time to give an extra fillip to growth that remains uneven.”

Full earnings calendar can be found here at Bloomberg: http://www.bloomberg.com/apps/ecal?c=US

VIX closed at 17.42 yesterday, which is still below the 20 mark that we normally see when corrections gets going, so plenty of upside if things get rough.

Technicals

Market

S&P 500 emini (ES)

Dax

Crude

Corn

Eur/Usd

Res 3

1803

9603

97.30

445

1.3910

Res 2

1797

9550

96.80

436

1.3800

Res 1

1792

9430

96.30

430

1.3730

Sup1

1775

9320

95.50

420

1.3650

Sup 2

1767

9250

92.53

417

1.3530

Sup 3

1741

9170

91.30

405

1.3460

ATM calls Vols. nearby month

14

14

21.13

30.89

7.73

100 EMA

1759

9043

98.08

446

1.3279

200 EMA

1695

8703

98.93

479

1.3202

14 Day avg. Volume

1116K

81K

126K

112K

159K

 

 

S&P 500 Emini futures – Bearish momemtum intact below the 1803 resistance level and we need to break below 1767 to really get things moving lower. Remember we have plenty of room down to the 200 day moving average at 1695.

Dax futures – Bounced off the rising trendline (from 4th of September low through 16th Dec low) on the daily chart yesterday and looking for a retracement back towards at least 9550 resistance now.

Corn –  Stronger USD hurting corn and cannot really get any real bounce so far, still looks like a long trade, but need to see momentum to get into this one. The big trigger for the bulls would be a daily close above 445.

Crude Oil – Decent bounce off the 91.30 level low from 9th of Jan. and have tested the 97 resistance level, but not been able to really stay above that level. The bulls need to get above 97.00. As long as the 95.50 support holds the recovery mode of the market stays intact.

Euro – We favour selling the Euro on rallies below the 1.3720 resistance level and the first downside target is a 1.3395, followed by key support at 1.3288.

Today’s Economic Calendar (CET):

14:30     US Core Durable Goods (0.7%)

15:00     US S&P/Case Shiller (13.7%)

16:00     US CB Consumer Confidence (78.3)

 

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Web:     www.kbrcapitalpartners.com

 

 

Risk Warning:  

Any information in this report is based on data considered to be reliable, but no representations or guarantees are made by KBR Capital Partners AS with regard to the accuracy of the data. This information is provided on condition that we accept no responsibility, legal or other for its contents. We, including our directors, officers, employees or publishers, disclaim all liabilities. Any statement constitutes only current opinions, which are subject to change. Neither the information nor any opinion expressed shall be construed to be, or constitute an offer to sell or a solicitation of an offer to buy any investments mentioned herein. Prices can go down as well as up. There is a significant risk involved in derivatives trading, including the risk of loss greater than the original investment. Past performance is no guarantee of future results. Conditions can vary from client to client, and therefore influence performance. The opportunity for profit creates a corresponding risk of loss. Anyone wishing to invest in any of the products mentioned should seek their own financial or professional advice.

 

 

 

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