6th June 2019
US markets shrugged off worrying figures emerging from America’s labour market yesterday afternoon The ADP employment report, an unofficial gauge ahead of Friday’s official reading, indicated that just 27,000 jobs were added to the US economy in May, a tenth of April’s figure.
The European Commission has taken the first step towards fining Italy over its mounting debt pile, setting the stage for another budget battle with the country’s crumbling coalition government. Brussels warned of a building debt “snowball” that “remains a source of vulnerability for Italy’s economy” as it started a disciplinary process that could lead to a €3.5bn (£3.1bn) penalty.
The cost of Italian government debt spiked after the decision as markets brace for another summer of volatility. Last year the EU and Italy clashed over plans to ramp up spending and the ruling populists want to introduce a lower flat tax in the 2020 budget to shock its ailing economy into life. The European Commission predicted that weak GDP growth will lift Italy’s debt-to-GDP ratio to 135pc in 2020 from 132pc in 2018. It warned that bond market volatility could spillover into its banking sector and tighten “financing conditions for firms and households”.
The warning comes as the populist coalition nears collapse amid squabbling between the anti-establishment Five Star Movement and the far-right Lega. Markets were rattled by the decision as the Italian 10-year bond yield jumped 10 basis points to above 2.60pc before later rebounding. The FTSE MIB, Milan’s blue-chip stock index, closed down 0.4pc, led lower by its banking stocks.
Mixed Markets
Asian equity futures opened mixed, with Nikkei futures slightly up, while the Hang Seng may open down. U.S. stocks climbed on optimism Mexican tariffswill be avoided. Treasuries rose as a weak private-jobs report bolstered bets the Fed will ease, outweighing solid service-industries figures. The spread between 2- and 10-year yields reached the widest since November. The dollar rose against all G-10 currencies except the kiwi. Oil entered a bear market after U.S. supplies jumped the most in almost 30 years.
FTSE 100 Trading Signals, Forecast and Prediction
The FTSE managed to close the gap yesterday at the 7260 level but didn’t manage to push up to the daily resistance at 7274 after hitting that level, and instead promptly fell away to test 7200. That level held and has now also become the 2 hour moving average support, with the coral slightly below it at 7176. If the bulls can maintain the move above 7200 then we may well still see a rise to the 7275 resistance area where we have a couple of longer term resistance levels – specifically at 7274 and 7278. As such I am feeling that if we get to this area it is worth a go shorting here.
Gold continued its rise yesterday and managed to get all the way to the 1340 level where we had a stall, however it looks to be consolidating around the 1330 area at the moment.
Should the FTSE break below 7200, then as mentioned 7176 is worth watching (we also have a fib at 7170), but a decline to 7080 is distinctly possible again. I will probably try another long at the 7175 level. Support is at the 7080 level on the daily, as well as the bottom of the 20 day Raff channel at 7068.
The S&P is at the top of its 10 day channel at 2825 and the 2831 is looking like decent daily resistance. That latter level might well tie in with the FTSE hitting the 7275 area and could well see a bit of a dip down from there.
R3 for today is at 7312 so should the bulls really push on then we may well get this high. The ASX200 was fairly positive during the early session, reaching 6400, and we may well see a rise and dip play out for us too.
News highlights today include; German Industrial Production, EZ GDP (Revised), US International Trade, Initial Jobless Claims, Labour Cost & Productivity, ECB Rate Decision & Staff Projections, BoE’s Carney, ECB’s Draghi, Fed’s Kaplan & Williams. Supply from Spain & France
At 12:45 we have the ECB rate decision then Draghi talking at 1330. Might well get a bit choppy around these times, especially the Dax.
So fairly simple plan for today, similar to the past two days and looking at a rise and dip from the resistance area 7260 to 7278
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