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The FTSE 100 closed lower Monday as tightening lockdowns in China added to investors’ concerns about a recession amid the Bank of England’s dour economic outlook last week. The index fell 2.3% to record its lowest closing since March 16, with miners and oil majors Shell, BP leading losses as commodity prices retreated on demand concerns.
Stocks pared losses and U.S. equity futures climbed, providing a little respite for global markets from concerns about an economic downturn.
An Asia-Pacific equity gauge Tuesday trimmed a drop of about 2% in half, aided by a turnaround in China. S&P 500, Nasdaq 100 and European contracts rose, pointing to steadier sentiment following a Monday rout in U.S. shares.
The outlook for stocks is deteriorating in relentless fashion, and there’s one key reason it’s likely to go on doing so. Sure, there are a swarm of immediate concerns — war in Ukraine, China’s slowdown, de-globalization supply shocks — but the key worry is central bank tightening in response to sizzling inflation. U.S. stocks are getting close to what would be their first so-called bear market since the pandemic.
Russia’s economy has plunged into its worst crisis for almost three decades as the country is battered by Western sanctions, a leaked copy of the Kremlin’s own forecasts shows. The Russian finance ministry is predicting a 12pc collapse in GDP this year, the biggest contraction since 1994 when it was shifting towards capitalism under Boris Yeltsin, the first post-Soviet president. A collapse would wipe out around a decade of economic growth.
Ferdinand “Bongbong” Marcos Jr. won a landslide victory in the Philippines presidential election, bringing his family back to power in Manila 36 years after his dictator father fled the country. While both major candidates had pledged to revive the economy and boost employment, 64-year-old Marcos Jr. drew on the support of voters comfortable with the strong-man rule of outgoing President Rodrigo Duterte. It’s uncertain how he’ll handle a decades-long investigation into his family’s wealth as well as ties with the U.S. and China.
FTSE 100 live outlook prediction analysis for 10th May 2022
It all got a bit bearish off the 7395 resistance level yesterday as the bulls took flight, and overnight we have seen a test of the bottom of both the Raff channels at the 7160 level. That has triggered a bit of a bounce so far, and we may well have a slightly more positive day today. The S&P broke below the 4000 level but has moved back above and the bulls will certainly be keen to defend this level more. The S&P 500 is down 16% in the first 88 trading days of 2022, the 2nd worst start to a year in history.
The shorter time frames suggest that we should see a bounce this morning, and a rise to test the various 2h resistance levels would fit pretty well. 7320ish FTSE100, 4075ish S&P500, 13560ish Dax40 are the areas to watch.
The central banks are still keen on further rate rises which the market is reacting too (amongst other things – lots of fear), but once they become accustomed to rates at a higher level we may well see money start to flow back into stocks.
Initial resistance is at the daily pivot at the 7267 level and then I am looking at the 7315/7320 level as key resistance above that. We have a cluster of key things here as you can see from the list, the main one being a test of the Hull MA finally. That should therefore get a reaction and a short here is worth a go.
If the bulls can push past 7320 then 7380 is the next main level with the 30m 200ema here. Above that then the bulls will get quite the tailwind as it opens up 7440ish where we have the 2h coral, and yesterday’s drop would fade in the memory!
For the bears, they will be looking to break below 7200 again, as that should see a test of the overnight low and another test of the Raff channels in hours this time at 7160. Below that then 7142 is S1 and 7100 round number below that.
For today though I am thinking a bit more bullish. As you may know we usually get a bull Monday, bear Tuesday, and if that doesn’t play out on the Monday we can get the relief bounce on the Tuesday. We may well get that today and already things are looking like that could play out, at least initially.
Good luck today and I hope you didn’t get too mauled yesterday with that drop!
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