7th August 2019
Tuesday was another day of punishment for equities markets across Asia and Europe, without even the relief of a ‘dead cat bounce’ to ease traders’ worries. In practice, neither China nor the US is currently ramping up the trade battle, but China flexed its muscles in a big way on Monday, and it might take a while for markets to shake off their shock.
As far as the White House is concerned, things will be carrying on as plans: meaning Chinese officials are expected to arrive for talks in September brimming with goodwill, even as the US levies a raised tariff against its goods.
Like the Brexit situation, the trade war now feels like a road of uncertainty lies ahead before a deadline that markets see as bad news. On the topic of which, global turbulence is doing a good job of distracting from the UK’s woes currently, but it can’t stay that way forever. The FTSE and sterling are declining in tandem: something which defies the blue-chip’s typical course as can only mean bad news for many of Britain’s biggest businesses.
The FTSE 100 didn’t drop down to the 7150 support in the end but the live room long at 7186 yielded a few points as the bulls bought it up to 7260. However, the rise was short lived, as we then dropped back to 7180!
Asian equity markets were mixed after U.S. stocks recovered somewhat from Monday’s bloodbath, with all major indexes gaining more than 1%. The White House put an optimistic spin on the trade friction, with Larry Kudlow saying the administration still expects Beijing’s negotiators to come to Washington for talks in September and will look at China’s steps to support the yuan. Meanwhile, the PBOC reassured a number of foreign exporters the currency won’t continue to weaken significantly. But the half-baked sell-off has traders worried the worst is yet to come.
Trump and Xi’s Big Bets
Despite a market recovery, ties between the U.S. and China are at their lowest point in decades. A big part of the problem is that neither country’s leader believes the other is serious about making a trade deal: China sees Trump as posturing ahead of the 2020 election, while U.S. officials think Xi is looking to wait him out for a better deal. Either way, the political space for compromise is diminishing as hardliners take center stage, prompting investors to weigh the potential economic fallout.
FTSE 100 Trading Signals, Forecast and Prediction
Despite dropping below 7200 overnight the futures markets have defended the daily pivot level at 7165 and with the 37 point dividend today we may well see some bullishness creep back in today. The bulls failed to reach the 7280 level yesterday, with the rise faltering at 7240 instead before dropping back. Buying pressure is there, just cautious.
For today there is initial 2 hour support at the 7140 level and resistance at 7290 currently (but steadily dropping). We may well see that falling resistance tie in with R1 at 7275 to act as a bit of a hurdle for the bulls and as such we may have a falter here. Ties in with 7280 being resistance from yesterday as well.
To start with we are just hitting some 30min resistance at 7185 so we may well see an opening dip down towards that 7140 area before the divi driven buying starts. Asian markets were mixed, and the ASX200 had a small opening dip before rising, a pattern that I am thinking we will also follow.
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