Futures are pointing to a fall of around 1 percent this morning (77 points) to roughly 7,550 index points. This comes after reasonable selling in US markets overnight, though most of the selling was confined to the technology stocks after a rebound in bond yields. Markets have jumped strongly higher recently on the back of rate cut bets, but they look to have potentially gone too hard, too fast, and some profit taking shouldn’t be too unexpected.

Our market reached 0.1 points off its all-time high yesterday, which is incredible given where we finished October. Such a rapid move cannot go on forever without a pullback.

If we do see a pullback we would expected a higher trough given the overall uptrend. The first target could be roughly 7,500, which is potentially the next key level of support. If selling is aggressive, we could blow past it with 7,450 and 7,400 being the following key levels.

US Markets

Equity markets closed lower overnight, with both the Dow Jones and S&P 500 down -0.8% and NASDAQ down -1.2%, as data revealed a measure of US factory activity remained stuck in contraction territory for a 14th month in December, restrained by weaker orders.

European Markets

European equity markets closed lower overnight, with the Stoxx Europe 600 down -0.9%, German DAX down -1.4% and U.K. FTSE 100 down -0.5%.

Asian Markets

Asian equity markets closed mostly lower overnight, with the Shanghai Composite up +0.2%, amid signs that China is trying to contain the damage from harsh new gaming regulations with a report claiming authorities have fired the top official at the country’s gaming regulator. 

The Hang Seng was down -0.8%, KOSPI down -2.3% and Nikkei 225 remained closed for a holiday.

Manufacturing activity in India moderated in December to the weakest in 18-months as the pace of factory orders and output lost momentum, while still outperforming Asian peers as new orders and business confidence continued to grow and manufacturers benefited from an easing in input costs, which rose at their second-slowest pace in more than three years during the month. 

WTI oil is trading at US$73.01 a barrel, as supply disruptions in Libya with the country’s largest oil field beginning the process of fully shutting down after protests, increased tensions in the Middle East and an OPEC statement stressing its commitment to stabilizing prices ushered bulls back into the market.

Iron ore price is at US$133.59 per ton. 

Spot gold is trading at US$2041 per oz.

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