18th February 2019
Global stocks surged Friday amid hopes that the US and China are on the brink of sealing a deal to end the trade war. The FTSE 100 slipped off its intraday highs late in trading but still closed at a fresh four-month high. Eurozone blue-chip stocks rallied 1.9pc while the Dow Jones in New York jumped 1.4pc.
Sterling also ended the week on the front foot, its rally extending after Donald Trump pledged to strike a trade deal with the UK. Sterling has gained 0.7pc versus the euro at €1.1410.
Global stocks clawed back the last of their losses Friday, from December’s rout after Beijing revealed it has reached a “consensus in principle on major issues” in crunch trade talks with the US. Negotiations between the rivalling superpowers have been extended into this week as they rush to strike a deal on trade before a 90-day ceasefire ends in early March.
Chinese state-run news agency Xinhua revealed that the Trump administration and China have now had “specific discussions about a memorandum of understanding on bilateral economic and trade issues”. US Trade Representative Robert Lighthizer claimed that negotiators had “made headway on very, very important, and very difficult issues”.
Hopes of a breakthrough in trade talks helped markets shrug off more worrying data from the American economy. Industrial production unexpectedly contracted 0.6pc month on month in January as the global factory slump spreads.
The FTSE 100’s rally extended into a fifth day as European and US markets enjoyed stronger gains. The FTSE 100 jumped 39.67 points to 7,236.68, a fresh four-month high, while eurozone blue-chip stocks advanced 1.8pc.
Asian stocks kick-started the week on the front-foot as the region followed suit to last Friday’s gains on Wall St. where sentiment was buoyed by US-China trade talks, while US President Trump tweeted that US-China trade talks are very productive, and progress is being made on many fronts.
Central Banks in the Spotlight
Central bankers get a chance to flesh out their increasingly dovish outlooks for monetary policy this year as economic data continue to disappoint, with minutes from the recent Federal Reserve meeting, speeches from the European Central Bank’s Mario Draghi and a parliamentary testimony from the RBA’s Philip Lowe after minutes from the Australian central bank on Tuesday. Fed officials John Williams, Richard Clarida and Randal Quarles are among those speaking on Friday. The week will also see Bank of Canada Governor Stephen Poloz speak on Thursday.
FTSE 100 Trading Signals, Forecast and Prediction
The news flow has remained pretty positive overt the weekend and there is headway being made on the trade talks apparently. As such I expect we will see a bull Monday, though the bulls will need to break initial resistance at the 7270/80 level. If they manage to do that then the daily resistance is at 7304 and the next main level of note. The mood is generally still bullish, and the 2 hour chart and daily remain bullish. I am thinking that we get an initial rise to the R1 and fib level at 7275, and then a dip back down to the daily pivot from there. The US may then pull things back up later.
If the bulls were able to push past 7320 then it all looks likely for a rise to 7450 or higher in the back end of February. Some might say that it’s being pushed higher as the Brexit date gets closer…. Interesting article last week though showing how the UK is doing better than the Eurozone in terms of the numbers (employment etc).
Support wise for today, the bears will need break the 7235 level (that was Fridays resistance now becoming support and also the daily at 7229). Should they manage to do that then the next support level of note is the 7200 area – we have a cluster of supports there – 2 hour chart coral, 200ema 30min and S1.
Generally it looks positive for today and I expect we remain bullish unless the trade talks go off the boil and turn negative. The S&P 2 hour support is now at 2766 so buying the dip on that today also looks the best play. The DAX also showing 11219 on the 2hr as support.
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