FTSE 100 live outlook prediction analysis for 22nd October 2020
- Pound passes $1.30 to hit one-week high
- FTSE 100 falls as investors nerves grow
- Government borrowed a net £36.1bn last month – the third-highest amount on record
- Debt-to-GDP ratio highest since 1960
- Inflation turns positive as Eat Out to Help Out effect fades
- Rishi Sunak cuts spending review down from three years to one in response to pandemic
The pound has jumped to a one-week high against the dollar after EU chief Brexit negotiator Michel Barnier said a trade agreement with the UK is within reach. Sterling pushed over $1.30 against the backdrop of wider dollar weakness, putting pressure on the FTSE 100 – which has fallen sharply after a mixed open. Earlier, stats showed UK borrowing continued to surge in September, with a net £36.1bn borrowed as the Government continued to spend heavily to combat coronavirus. The continued deficit surge put Britain’s debt-to-GDP level at 103.5pc, its highest level in sixty years.
Consumer prices returned to growth at 0.4pc month-on-month, as a result of increasing transport costs, and the end of the Eat Out to Help Out meal discount scheme, which lowered restaurant bills in August.
The FTSE 100 ended the day down almost 2pc, or more than 100 points, at 5,776 points following a big rally in sterling today. Mounting optimism that a deal will be done with the EU sent the pound up about 1.5pc to $1.3142. Stocks such as Diageo, AstraZeneca, Unilever and GlaxoSmithKline and British American Tobacco weighed on the blue-chip index as all make most of their revenues abroad, so sterling’s positive run has pushed them into the red.
Markets Mixed
U.S. stocks ended a volatile session slightly lower amid signals that an American fiscal stimulus package is unlikely to become law prior to next month’s election. Asian stocks were poised for a mixed start to Thursday trading: Futures dipped in Japan and Australia while those in Hong Kong rose. The yield on 10-year Treasuries broke above 0.8% to the highest since June. The offshore yuan continued to strengthen. Elsewhere, the pound jumped after European Union chief Brexit negotiator Michel Barnier said a deal is within reach.
Vaccine Restart
U.S. trials of vaccines made by AstraZeneca and Johnson & Johnson are expected to restart as soon as this week, according to Moncef Slaoui, the head of Operation Warp Speed. J&J paused its trial last week when a participant got sick, while AstraZeneca’s U.K. trial was paused last month after a woman developed neurological symptoms. In other trial news, a participant who died during Astra’s study in Brazil hadn’t actually received the company’s shot, according to a person familiar with the matter. Meanwhile, U.S. hospitalizations for Covid-19 hit the highest point since Aug. 22.[Bloomberg]
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
U.S. and European equity futures retreated with Asian shares, and the dollar edged higher, after a top American intelligence official said that Russia and Iran have attempted to interfere in next month’s presidential election.
S&P 500 contracts dropped, and shares in Hong Kong and Sydney saw modest losses. Treasury yields dipped, though remained above the 0.8% level. Earlier, U.S. shares closed lower after a volatile session amid signs that a U.S. stimulus package is unlikely to become law before the election. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin made progress in their latest talks and will speak again Thursday even as the odds remained long for a deal that could pass in the Senate.
Elsewhere, oil dropped below $40 a barrel in New York after an industry report pointed to a surprise increase in American crude stockpiles.
Well that was a bit bearish yesterday, as the pound climbed on renewed Brexit deal hopes. The FTSE dropped through the 5870 support level and steadily dropped all session, while the S&P also gave up its gains. The line in the sand for the bulls now is 5695 for the FTSE and 3400 for the S&P. They will be keen to defend that, as in the case of the FTSE a further 100 point slide down to 5600 is likely if it breaks. That said, 5685 is the bottom of the 10 day Raff channel for today so we may well see a reaction in this area. Markets being driven by stimulus (USA) and Brexit (UK) makes for tricky conditions to trade, and with associated volatility.
The 30min coral is initial resistance on the FTSE at 5770 this morning, so if we get an initial rise we may see a stutter here. Above this then 5813 is the daily pivot and then the 5832 for the Hull moving average on the 2 hour chart. Should we see this then a short here is worth a go, as that also ties in with the fib level and the 200ema on the 30min timeframe as well which are just above at 5840. Above this and the bulls would breathe a big sigh of relief as it will make it look positive again for the month end pump in the run up to the election. 5900+ would most likely be back on the cards.
For the bears we have initial support from S1 at 5705, and then daily support just below this at 5695. We also have the bottom of the 10 day Raff just below this at 5683, so should we drop down to this area we may well see it hold. The SPX as mentioned needs to hold the 3400 level today really, otherwise the slide will continue down to 3350. The SPX is also sat on the 25ema on the daily as I write this at 3422 which may well hold as initial support.
Somewhat ironically the ASX200 had a fairly positive session today after an opening dip, despite the weakness on the futures for the FTSE and SPX. As such I am thinking that we may well do something similar. Need to keep watching the Brexit news flow and also cable for the moment as its back to being correlated for the moment.
We are just on the bottom of the 20 day Raff channel first thing this morning hence thinking that an initial kick up may well play out. Gold has been front running indices recently and has dropped off overnight following its rise yesterday – could well be giving us a clue for some indices upside to come.
So, watching 5705/5695 support area with 5652 and 5605 below that. Resistance wise 5810 and 5830 with 5900 above that. Good luck today.
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