2nd September 2019
Recession fears, Brexit worries and trade tensions sent the FTSE 100 to its worst monthly losses in almost a year for August, after four weeks marked by summer volatility. The blue-chip index, which consists of London’s biggest listed companies, fell 5pc over the month, its worst drop since October.
The fall was inches from a four-year record, which would have stretched back to when a slowdown in China sparked fear for the state of the global economy in August 2015. August is known for its volatility, as low levels of trading volumes and reduced business activity typically lead to exaggerated price movements. Safe haven assets boomed at several points, with the Japanese yen and Swiss franc gaining strength
Global markets were rattled at the start of the month after Donald Trump, the US president, announced ramped-up tariffs against China, sparking a back-and-forth of retaliatory responses. A bumpy ride for sterling added to pressures on the exporter-heavy bourse, which usually benefits from a weak currency. After days in the doldrums at the start of the month, the pound began to eke out gains after Boris Johnson’s visits to European leaders and the G7 summit, and increasingly public efforts to block a no-deal Brexit raised sentiment.
The pound reversed several days of losses on Friday – triggered by the Prime Minister’s plans to prorogue Parliament – to find narrow gains. The biggest weight on Friday’s FTSE 100 session, and through most of the month, was Royal Dutch Shell. The oil giant had a torrid August amid falling oil prices, shedding more than 12pc on its B-shares (the company has two share prices listings because of its management structure) – its worst decline since the financial crisis in 2008.
More Tariffs, No Deal
The Trump administration slapped tariffs on roughly $110 billion in Chinese imports on Sunday, marking the latest escalation in a trade war that’s inflicting damage across the world economy. The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods — including laptops and cellphones — will be hit with 15% tariffs on Dec. 15. China retaliated as of 12:01 p.m. Sunday in Beijing, with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. Face-to-face talks between Chinese and American trade negotiators scheduled for Washington in September are still on, Trump told reporters Sunday after returning from Camp David.
U.S. stock futures slumped when trading began Sunday evening. The yen climbed and the yuan edged lower after the new U.S. tariffs kicked in on Chinese goods and data showed further deterioration in China’s manufacturing sector. U.S. equities saw their first monthly decline since May despite finishing mostly higher on Friday. American markets are closed for the Labor Day holiday. Key events this week include Australia setting monetary policy on Tuesday. Federal Reserve speakers include New York Fed’s John Williams on Wednesday and Fed Chairman Jerome Powell on Friday. The U.S. jobs report on Friday is projected to show nonfarm payrolls rose by 165,000 in August, slightly above the month prior, and for the unemployment rate to be steady at 3.7%.
FTSE 100 Trading Signals, Forecast and Prediction
Most Asian stocks fell with U.S. equity futures after the latest tariffs kicked in on Chinese goods and data showed further weakness in China’s manufacturing sector. The yen edged higher and the yuan dipped.
Start of the new month and we should get back to some more volume on the trading front this month. The month has started yet again with tariffs at the forefront as the latest tariffs kicked in on Chinese goods. That said, on Friday the bulls fought back well towards 7240 after the drop down to 7180, and as its the start fo the new month we may see an inflow of new month money, to help things along this morning.
There is support initially at S1 at 7190 and just above Fridays low, and we also have the 2 hour support here so a long here is probably worth a go for a rise towards the 7265 fib level area. If the bulls were to break above this level then I am expecting the top of the 10 day Raff and 200ema on the daily chart at 7290/7300 to be tested in fairly short order. The daily resistance level is still at 7225 from the 25ema so the bulls will be trying for a close above this level to get things positive for September.
Should the bears break below 7190 then a drop down towards 7150/7160 looks likely, where we have the 200ema on the 30min and also a key fib. Should we get this low then a long here is worth a go, however, I am thinking that we will see some bullishness today, despite the tariffs kicking in and the fact that we are not that far below the Friday close price.
US futures gapped down, with the SP starting Sunday evening at the 2905 area, but have regained ground since, and still looking on for a rise towards the 2960 level on that. Overall the 2880 to 2900 area looks decent support on the S&P for a rise towards 3000 again, on the longer timeframes so bear that in mind.
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