Technical analysis for FTSE 100 for 17th April 2024
London stocks dropped nearly 2% on Tuesday with its broadest selloff in years on growing geopolitical tensions in the Middle East and reduced expectations of U.S. interest rate cuts, while a slide in Dr Martens exacerbated losses.
Britain's main indexes FTSE 100 and FTSE 250 witnessed a freefall and tumbled 1.8% each. The FTSE 100 logged its biggest intraday percentage drop in eight months, with nearly all stocks on the index ending in the red, while for the FTSE 250 the drop was the worst in three months.
Among other sectors, industrial metal miners followed with a 3.1% fall after prices of non-ferrous metals dropped on a stronger U.S. dollar.
Equities have been under heavy selling pressure as recent economic data in the U.S. have pushed back rate-cut expectations, with money markets expecting the Bank of England to cut rates by 41 basis points in 2024.
Andrew Bailey has signalled UK interest rates remain on course to fall in the coming months amid growing fears that stubborn inflation will force the US to delay rate cuts. The Bank of England Governor said he saw “strong evidence” that inflation was continuing to come down in the UK, despite the resilience of the British jobs market.
Meanwhile, unemployment in the UK edged higher in February and core wages saw their weakest climb since mid-2022, bolstering bets for Bank of England rate cuts in the near future.
Asia
Asian shares were mixed on Wednesday as the world's most powerful central banker had a change of heart on U.S. rate cuts this year, pushing Treasury yields to new five-month highs and the dollar towering against other currencies.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%, after plunging more than 4% in the past three sessions. Taiwanese shares outperformed with a gain of 1%, while other markets were lacklustre.
Japan's Nikkei, however, dropped 0.7% to the lowest in two months. China's blue chips fell 0.1%, while Hong Kong's Hang Seng index edged 0.1% higher.
Wall Street stocks ended slightly lower on Tuesday, helped a little by still-robust corporate earnings. Two-year Treasury yields retested 5% overnight and were last at 4.9828%, while 10-years held near a five-month high at 4.6674% on diminishing expectations of Federal Reserve policy easing this year.
Fed Chair Jerome Powell said recent inflation data, with three months of upside surprises, had not given policymakers enough confidence to ease policy soon. He noted the central bank may need to keep rates higher for longer than previously thought.
Markets have already slashed the amount of easing expected this year to fewer than two rate cuts, a sea change from about six cuts predicted at the beginning of the year. The first rate cut is still expected in September, although the market's confidence in that has declined.
The International Monetary Fund said on Tuesday the global economy is set for another year of slow but steady growth, with U.S. strength pushing world output through headwinds from lingering high inflation, weak demand in China and Europe and spillovers from two regional wars.
Geopolitical tensions in the Middle East are still running high. Israel vowed to respond to Iran's weekend attack despite international calls for restraint, although its war cabinet put off a meeting to decide on its response until Wednesday.
FTSE 100 technical analysis for today, 17th April 2024
Well the bears are still in charge given the uncertain backdrop though Bailey talking a good game yesterday to try and boost things alluding to rate cuts in the UK. Powell on the other page and saying don't hold your breath - not really much of a surprise though!
Initially today we may well be on for another test of the 7800 level to start with and a double bottom with yesterday. If that holds it should set up a climb towards the 7900 area where we have some key resistance for today from the 200ema, key fib and the R1 level. The bears may well then reappear here in force if we get that high.
Below the 7800 level then the 7779 daily support is still in play with the 20d Raff channel bottom also here and then below that 7752 - a bounce here may well happen so worth trying a long off this level as well today if seen.
Even lower, S2 is 7725, but (famous last words) we shouldn't get that low and we may well follow the ASX200 and have a bit of a climb today. Oil has dropped off as well recently to lend a bit of stability to the FTSE100.
If the bulls were to break above the 7900 level (feels like a big ask though!) then the 7920 2h red coral line is next up and also worth a short off this. Higher up 7974 is R2, though again that may be a tad optimistic for today.
Despite talk of rate cuts in the UK, inflation has remained at 4.2% - a drop from the 4.5% previously, though still higher than the 4.1% forecasted. Probably needs to be at 3% till they start really considering rate cuts. Maybe just prior to the election!? As a positive though both CPI and RPI have dropped back from last month.
Good luck today
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Almost made 7900!