5th June 2019
The head of the US central bank helped global markets rebound from a near four-month low after boosting stimulus hopes as recession worries mount. Federal Reserve chairman Jerome Powell said the central bank’s rate-setters are “closely monitoring” the impact of the trade war and vowed to “act as appropriate to sustain the expansion”. Investors believe the central bank will cut interest rates as many as three times by the end of 2019 as the trade war dampens global growth.
The speech signaling the Fed’s willingness to tackle an economic downturn helped stocks stage a recovery following a turbulent May plagued by recession fears. The Dow Jones enjoyed its strongest intraday gain since January, rallying as much as 1.8pc, as the FTSE 100 closed 0.4pc higher and eurozone blue-chip stocks advanced 1pc.
His speech fuelled speculation that the Fed will be forced to make as many as three cuts to borrowing costs by the end of the year to support the US economy and markets. Fears that the trade war will tip the world economy into recession sent stocks sliding during a turbulent May. Signs of support from top central banks lifted the mood on markets as attention turned to the European Central Bank’s meeting tomorrow.
The S&P 500 surged as much as 1.7pc in afternoon trade as eurozone blue-chip stocks closed 1pc higher. The FTSE 100 lagged behind, climbing 29.40 points to 7,214.29, as rate cut speculation boosted sterling’s value against the dollar, curbing the gains of the index’s overseas earners.
US President Donald Trump encouraged Theresa May to “stick around” to do a trade deal with the US at a breakfast meeting with FTSE bosses on the second day of the American president’s state visit. Mr Trump said: “I think we’ll have a very substantial trade deal, it’ll be a fair deal. I think this is something your folks want to do, my folks want to do.” He told the Prime Minister, who will formally resign as leader of the Conservative Party on Friday: “I don’t know exactly what your timing is but stick around, let’s do this deal.”
Asian equities rose Wednewsday after U.S. stocks jumped the most since January on Powell’s comments. Big banks surged as Wells Fargo analyst Mike Mayo said the industry would “party like it’s 1995” if rates are cut. Treasury yields rose from multiyear lows as the Fed chairman stopped short of signaling any imminent moves, and the dollar declined. Oil advanced and gold was little changed.
Looking ahead to todays news, highlights include EZ & US Composite and Services PMI, UK Services PMI, US ADP, ISM Non-Manufacturing PMI, BoE’s Ramsden, Fed’s Clarida, Evans, Rosengren, Bostic.
Today’s dividend is 7.2 points.
FTSE 100 Trading Signals, Forecast and Prediction
The FTSE just missed hitting the 7135 support area before rising yesterday but it was a slow and steady grind up, only hitting the 7240 area overnight. Having seen that resistance level we have dropped back a bit, however, it looks possible that we will rise towards the 7275 resistance level next, if the bulls can break 7245. We have moved out of extreme fear on the gauge here, but still only at 26/100 so the buying could well continue for a bit longer. That said, the 7275 and 7300 areas still look decent resistance and we have the top of the 10 day Raff channel at 7263 for today.
Support wise there is a whole cluster around the 7155 to 7167 levels, however, with the rise overnight we have crossed back above the 200ema on the 30min chart, and may well see initial support this morning from that at 7196. If we do get a drop down initially to that level then a long here is worth a go, but further longs in that lower support range are also worth a go.
The bulls will be keen to break above the 7245 level as that does remain resistance, and having dropped off it overnight we may see an in-hours reaction as well. I will probably try a short at this level as well as the order at 7267 for the higher up resistance levels. If we do go for it over the next few sessions and move back above 7300 then 7373 is the next daily level of note.
The 2 hour chart has finally got a green coral and support from that is at 7153 for today. We also have a small dividend of 7.2 for today to help the bulls. There May’s last day on Friday, and the hunt for the next leader starts in earnest.
The daily chart remains bearish though with declining daily Raff channels and the bulls will need a solid hold above the 7270 area to start improving the picture on that time frame. The US pushing on yesterday and the S&P moving above 2800 suggests more upside, possibly as far as 2867, but that is dependant on the bulls holding it above 2800.
So fairly simple plan along similar lines to yesterday with a dip down to the supports then a rise back up towards 7245, possibly 7275.
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