4th March 2019
Global stock markets have enjoyed their best start to a year in almost three decades as the end of the trade war nears and central banks hastily backtrack on plans to unwind stimulus. More than £3 trillion has been added to the value of world stocks in 2019 as markets bounce back from their worst year since the financial crisis. The MSCI World Index has rallied 11pc in January and February, its best start to a year since 1991. Although global growth has struggled to recover from the weak final quarter of 2018, the outlook has started to brighten for investors.
However, risks to the UK’s financial sector – and so to the wider economy – are centre stage this week. The Bank of England’s Financial Policy Committee publishes its assessments of the key hazards tomorrow. Surging global corporate debts are one danger the Bank has highlighted recently, while political tensions in Europe and across the Pacific are also likely to feature.The resilience, or otherwise, of the economy is also under scrutiny.
Global growth has slumped and it is already weighing on Britain’s manufacturers, who reported falling export orders last week. Today it is the turn of the construction industry, and tomorrow the dominant services sector. The PMIs – influential private sector surveys – will give an idea of whether or not these industries have escaped the slowdown.Economists expect not, predicting stagnation in February. Conditions in the eurozone is forecast to be even worse, with analysts predicting a contraction in Italy and France, a slowdown in Spain and little change to German growth.
Theresa May got a Brexit boost, as pro-leave Tories outlined their terms for supporting the PM’s plan, including stronger language that the Irish border backstop will be temporary, according to the Sunday Times. Meanwhile, the U.K. attorney general abandoned attempts to secure a hard time limit or unilateral exit mechanism from the Irish backstop, according to the Telegraph. The pound rose against the dollar, but has since given back much of the gain.
Trade Deal in Sight
Most or all U.S. tariffs on China are likely to be lifted as part of a trade deal between the world’s two-largest economies now in its final stages, said two people familiar with the discussions. Beijing made clear in a series of recent negotiations with the U.S. that removing the tariffs on $200 billion of Chinese goods from day one was necessary to finalize any deal, said the people, who weren’t authorized to talk publicly about the deliberations. China is offering to lower tariffs on U.S. farm, chemical, auto and other products, the Wall Street Journal reported earlier, citing people familiar.
Yuan, Aussie Rise
The yuan climbed with the Australian dollar as Asian trading got underway after the report on the trade deal. Meanwhile, the dollar came under pressure after U.S. President Donald Trump bemoaned the greenback’s strength as he resumed attacks on the Federal Reserve. The pound rose as Prime Minister Theresa May was handed a list of conditions her deal needs to meet to draw support of hard-line Brexiteers. Asian stock futures were mixed after the S&P 500 recorded its fifth weekly gain. Treasuries fell, while oil and gold both dropped. Traders will be closely monitoring China’s annual National People’s Congress that opens in Beijing on Tuesday. Li Keqiang will announce an economic growth target. The U.S. jobs report Friday may show hiring moderated in February.
FTSE 100 Trading Signals, Forecast and Prediction
Looks like we should be on for a bull Monday today. The SP long on Friday netted some nice points to close out the day. That rise has fuelled a rise on the FTSE 100 too, to see an overnight high at 7150. The 2 hour chart remains positive, as does the daily, despite the dip down to 7040. Dipped a bit further on the daily than I thought as I had the support at 7090 but the bulls would appear to still be in charge.
For today I am looking at initial support at the 7115 area where we have the daily pivot and just below the 200ema on the 30min chart. If this level holds then we should see a rise towards the 7180 level which is pretty strong initial resistance on the 30min and daily charts. We also have a key fib level at 7178 which may well keep a lid on the rise initially. If the bulls were to break above the 7180 level then we should see a further 100 points upside as they look to break the recent high and target 7300 and higher.
If the bears however take charge and break the 7115 support level then I am looking at the 2 hour support at 7082 and also the other key fib level at 7086. As such, if we were to dip down to this level then I feel a long here is worth taking. If that breaks then the recent low at 7040 remains support, with 6967 below that. 7045 is also S3 for today so if we did dip down to hear then it should in theory hold.
Friday saw the 30min green coral support hold at 7100, and that has support at 7122 initially today. The Australian market had a fairly positive start but then tailed off a bit – as such we may well have a rise and dip as well, with that 7180 area a likely stall area.
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