17th September 2019
European stocks closed red across the board yesterday after the oil refinery attack in Saudi. How things move in coming days is likely to depend on what comes out of Saudi, particularly whether Riyadh is confident enough to stick the blame for the attack directly on Tehran. Donald Trump is certainly pointing a finger at the Islamic Republic.
Saudi Arabia lost around half its production capacity – about 5pc of the global supply – as a result of the attack, which the US has blamed on Iran. Even after surging, oil still stood around its mid-August levels, reflecting the steady drop it experienced throughout a summer period wracked by trade war doubts. Oil giants gained from the price increase, with two FTSE 100 heavyweights – BP and Royal Dutch Shell – providing a substantial upwards push, though not enough to tip the index into the green.
The FTSE 100 closed the day down 46 points, or 0.6pc, at 7,321.4.
Meanwhile Chinese industrial production grew at its lowest rate since 2002, according to figures released by the Asian economic giant.
Markets Tested
Developments in the Middle East are testing sentiment after a bullish start to the month for global equities and other riskier assets. Asian stocks look set for a muted open Tuesday as investors assess heightened geopolitical risks in the aftermath of the Saudi Arabia strike. U.S. stocks slipped on Monday and the dollar jumped against peers. Oil surged amid pessimism that there will be a rapid recovery in oil production from the weekend’s attack. It may be weeks or months before the majority of output is restored at the Abqaiq processing plant. Elsewhere, the pound retreated after no signs of progress in Prime Minister Boris Johnson’s first face-to-face meeting on Brexit with European Commission President Jean-Claude Juncker.
More Trade Talks
Chinese and American senior trade negotiators are expected to resume talks in the next week and a half, while lower-level officials are expected to meet next Friday, U.S. Chamber of Commerce Chief Executive Officer Thomas Donohue said. U.S. Trade Representative Robert Lighthizer indicated there’s some movement on China buying U.S. farming products and other issues, Donohue said, but it’s “an extraordinary challenge” to get a complete deal and much work remains to be done. Both sides have taken steps to show goodwill recently, and U.S. officials are considering an interim deal to delay tariffs with China.
FTSE 100 Trading Signals, Forecast and Prediction
The bulls failed to break above the 7370 yesterday and in fact apart from the 7330 long yielding a decent haul of points it was all fairly flat. Surprising after the Saudi oil attacks. Since we have now dropped back a bit from that 7370 resistance area the daily support of note now is at 7297 and with the fib at 7291, along with the cam break out at 7290 we may well see a bit of a bounce at this area. The daily chart also remains bullish with moving average support at 7276 so I am thinking that in the short term, buying the dips is still a decent play. The S&P looks like its pulling back ready to then push higher, with support at the 2954 level currently from the daily moving average.
Cable has dropped back a bit from the 12500 level and is now sat on 30min support at 12410, but has lower daily support at 12294. If cable does drop back further that will help to underpin a FTSE rise (roughly speaking).
I am watching that 7290/7300 area closely this morning to see if it holds as support, if it breaks then I think that daily support will be tested at the 7240 area.
If the bulls were to break above the 7340 level then yesterdays high at 7367 is the next level to watch for with the 7398 remaining in play as well and a level that they will be keen to target. Not totally sure that we will get that high today, but the ASX200 had a dip and rise, and we may well have a similar pattern play out. Brexit continues to rumble on with a lack of progress being the order of the day. Still.
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