24th June 2019
Gold rose above $1,400 an ounce to hit its highest level for almost six years as a weaker dollar, economic concerns and geopolitical tensions sparked a flight to safety. Demand has jumped since the Federal Reserve indicated on Wednesday that it was likely to cut interest rates soon – for the first time in a decade. The comments sent the dollar lower, making it cheaper to buy the precious metal. Gold prices have surged about 10pc this month and rose as high as $1,412 an ounce Friday – its highest since September 2013 – before falling back to about $1,394.
Oil prices rose 1pc to just over $65 a barrel despite Donald Trump saying he aborted a military strike on Iran because it would have been a disproportionate response to the shooting down of an unmanned US surveillance drone by Tehran. The increase, which followed a 5pc jump on Thursday, reflected fears of a disruption to flows in the Middle East, which provides more than a fifth of the world’s crude.
Wall Street continued its winning streak, with both the S&P 500 and Dow Jones Industrial Average making further gains.
In London the FTSE 100 ended almost 17 points, or 0.2pc lower, at 7.407 points, with Hikma Pharmaceuticals and Rolls-Royce topping the fallers. Investors’ attention now turns to next week’s planned meeting between the US president and his Chinese counterpart Xi Jinping on the sidelines of the G20 summit in Japan.
A Trump tweet about “a very good telephone conversation” they had this week has fuelled hopes of a deal to end a trade war between the US and China that has hit global growth.
Global rally
Global stock markets will record their best first half performance in more than two decades, as central banks signal a new wave of stimulus to prop up stuttering economies. More than £5bn has been added to the value of shares this year on growing expectations that the Federal Reserve and European Central Bank will start cutting interest rates to tackle the global slowdown.
The MSCI World Index has gained 16pc in 2019, its strongest first half since 1998 just before the dot-com bubble burst.
Growth worries have mounted on markets amid signs that the economic malaise gripping China and the eurozone has spread to the US.
The latest leg of the stocks rally has been fuelled by the Fed moving towards its first rate cut in a decade after US-China trade tensions escalated. US markets hit a record high this week after the Fed vowed on Wednesday to “act as appropriate” to keep the economy growing.
Iran Plan
The U.S. will impose major new sanctions on Iran Monday, days after President Donald Trump abruptly called off airstrikes against the Islamic Republic. Trump told reporters that military action is “always on the table until we get this solved” and that if Iran’s leadership “behaves badly, it’s going to be a very bad day for them.” The Washington Post reported the president approved a cyber attack on Iran’s missile systems. Despite the hard line, Trump said he’s prepared to hold talks with Iranian leaders with no preconditions, repeating an offer made previously by his administration. The president told NBC that the proposed discussions have “nothing to do with oil” or shipments through the Strait of Hormuz but with preventing Iran from getting nuclear weapons.
Markets Wrap
Asian stocks had a mixed start to the week amid signs the recent global rally may be running out of steam for the moment. Oil climbed as the U.S. said it was planning sanctions on Iran. Futures in Japan pointed modestly lower, while Hong Kong contracts were little changed. S&P 500 futures opened steady after the gauge edged down Friday, pulling back from its all-time high reached in the previous session. The yen and the offshore yuan were little changed. The yield on 10-year Treasuries ended last week at 2.05%. The Turkish lira surged after the opposition candidate won the redo of Istanbul’s mayoral race.
Boris Scrutiny
Boris Johnson faced fresh pressure in his bid to become U.K. prime minister amid calls for him to answer questions about a spat with his partner that brought the police to his London home and signs he may be losing some wider public support. Johnson needs to show that he is willing to answer difficult questions, his rival Jeremy Hunt said in a Sky News interview Sunday, a day after the pair made their opening appeals to grass-roots Conservative Party members at a political roadshow that focused attention on the front runner’s character. His comments were echoed by International Trade Secretary Liam Fox, a Hunt supporter.
FTSE 100 Trading Signals, Forecast and Prediction
That was a decent drop off the 7444 resistance area in the end on Friday, though the bulls did try and push it up a bit higher, topping at 7458 in the end. Jitters ahead of the weekend saw a drop back below 7400, and as such that area is now showing a few resistance levels for this morning. The main one is the 200ema on the 30min chart which is at 7408. The bulls will be keen to break above this as it opens up a trip towards the fib at 7452, and possibly higher. We also now have daily resistance at 7469 and also still at 7493, so a rise towards these areas is still worth shorting.
If the bears do have a bit of a go this morning then we are looking at a drop down to test the daily support at 7365. Below this we have the fib level at 7351, and I think that we may see a bounce from this area. The ASX200 had a dip and rise session Monday and we may well have something similar. Of course the big news this week will be the G20 summit, trade wars and Iran taking centre stage.
Should the bears break below 7350 then 7300 is the next level to watch, though 7250 and 7191 are also showing as daily support levels to watch.
That said, there is the 25ema on the daily chart at 7344 and we haven’t tested that since the moving averages went bullish back on 11th June. Ergo we may well see this 7350 area hold as support, at least initially and would set up the dip and rise scenario for today. With that drop off the 7450 level though, the bears are certainly still holding some power and the fear/greed indicator is still on neutral. The US markets ended the week pretty bullish again though, and that sentiment may well continue to carry other markets higher for the moment.
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