Technical analysis for FTSE 100 for 4th June 2024
The FTSE 100 slipped on Monday, weighed down by the pharmaceutical and energy sectors, while investor optimism around a highly anticipated interest rate cut by the European Central Bank in this week's policy decision contained declines.
The blue-chip FTSE 100 index closed down 0.2%, while the mid-cap FTSE 250 advanced 0.8% in its third session of gains.
The pharma and biotech sector slumped 1.5%, after hitting an over one-month low during the day. Drugmaker GSK sank 9.5% to the bottom of the FTSE 100 after a Delaware ruling allowed more than 70,000 la wsuits to proceed over GSK's discontinued heartburn drug Zantac.
Energy stocks also lost 1.2%, in tandem with oil prices, which slipped over $2 per barrel.
Declines in the market were contained by broader gains on investor optimism ahead of the ECB's meeting later this week, where it is expected to commence its interest rate cutting cycle.
A survey from the Institute for Supply Management showed slowing U.S. manufacturing activity in May, fuelling some expectations of a September rate cut from the Federal Reserve.
Analysts predict the Bank of England (BoE) will closely shadow the ECB's movements. However, traders have priced in a 25-basis-point cut by the BoE only in November.
Asia & Overnight
Asian share markets were mildly weaker on Tuesday as global investors consider the prospect the U.S. economy's 'exceptionalism' is starting to unwind as manufacturing activity in the world's largest economy further weakened.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.1%, after U.S. stocks ended the previous session with mild gains. The index is up 1.6% so far this month.
Australian shares were down 0.21%, while Japan's Nikkei stock index slid 0.77%. Hong Kong's Hang Seng Index was flat in early trade and China's CSI300 Index off 0.16%.
The yield on benchmark 10-year Treasury notes reached 4.4001% compared with its U.S. close of 4.402% on Monday. The two-year yield , which rises with traders' expectations of higher Fed fund rates, touched 4.8184% compared with a U.S. close of 4.818%.
On Monday, U.S. Treasury yields fell to the lowest point in two weeks, after the country's manufacturing activity slipped for the second consecutive month in May.
On Wall Street, the S&P 500 index edged up 0.1%, the Dow Jones Industrial Average shed 0.3%, and the Nasdaq Composite rose 0.6%.
FTSE 100 technical analysis for today, 4th June 2024
The FTSE100 didn't quite manage to get to the 8375 level yesterday and has steadily declined again from just below that key level. For today it's looking like a bear Tuesday will play out, as the bulls are already now on the back foot after the positive start on Monday morning.
A decline down to the key support area at the 8205 area may well play out initially to test the S1 level, along with the key fib at 8222. The 30m chart is looking more bearish to start with today, and we have the red coral line at the 8277 to start with as well. The ASX200 had a slight bearish overtone today as well and that may well roll through into the FTSE100. Traders are still awaiting the ECB rate decision on 6th June, with a small reduction hoped for.
Below the 8207 level then 8182 is next up as the key daily level to look for, and then S2 at 8156 below that. 8182 should hold though.
However, all that said, it's worth noting that the 2h coral is green and is at 8235 which will be the first test of that line since the colour change. As it shows a bullish trend we may well see the bulls try and defend to start with today.
Resistance wise, the daily pivot at 8286 is first up and as that is just above that 30m coral we may well see the bears try and build on yesterday's decline here. Above that then 8337 is the key fib and the R1 level and the next one to keep an eye on. We also have the top of the declining 10d Raff channel here and would be a slightly lower low compared to yesterday if it held as resistance, giving the bears some more fuel.
We may well see a bit less range today ahead of the ECB decision as the BoE is largely expected to follow suit with what they do, though traders are now only expecting a 0.25% cut come November.
It's the first UK election debate this evening as well which might get a bit feisty, and with ReformUK now with Nigel Farage back in the mix, the election season is going to get a bit more fruity!
So, a bit of a consolidation day I am thinking, possibly with a bearish overtone as its Tuesday. Keep an eye on the 8200 and 8285 areas as support and resistance.
Good luck today.
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8200 holds the first test today