18th April 2019
Stocks in Europe ended yesterday largely in the green despite Germany bracing for its worst GDP growth in a decade. The FTSE 100 closed 0.02pc higher at 7,41.32 as the mining sector held the London equity benchmark back, while the FTSE 250 closed 0.33pc down at 19,585.13. The Paris CAC was 0.62pc higher at 5,563.09 and the Frankfurt DAX closed 0.43pc up at 12,153.07 despite the news that Germany has halved its 2019 growth forecast as its ailing manufacturing sector struggles to cope with the global industrial slump.
Germany is bracing for its worst GDP growth in a decade as its economy grapples with the global industrial downturn and the eurozone’s slowdown. Its government halved its growth forecast for 2019 to just 0.5pc after Europe’s biggest economy narrowly avoided recession last year.
Germany’s huge industrial sector has struggled to cope with a perfect storm of factors in recent months, including China’s slowdown, the threat of US tariffs, Brexit uncertainty and the car industry’s woes. Growth of just 0.5pc would match the sluggish expansion recorded in 2012 and 2013 during the depths of the sovereign debt crisis and be the joint-worst since 2009.
Meanwhile, trade tensions between the US and Europe escalated after the EU threatened to slap tariffs on $20bn (£15bn) of American goods over their long-running row about Boeing and Airbus subsidies. The EU targeted a range of US imports, including handbags, video game consoles and tobacco, in retaliation for the $11bn tariffs hit list released by the Trump administration last week. Both sides argue that US giant Boeing and European rival Airbus have benefited from government subsidies at the expense of each other.
EU Trade Commissioner Cecilia Malmström insisted that the EU did not want to spark a “tit-for-tat” tariffs battle with the US and will only use the countermeasures “in case there is no other way out”.
More U.S.-China Trade Talks
Senior U.S. and Chinese officials are scheduling two more rounds of face-to-face trade talks in an effort to reach a deal that President Donald Trump and his Chinese counterpart Xi Jinping could possibly sign by late May, a person familiar with the plans said. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin plan to travel to Beijing the week of April 29, according to the person, who spoke on condition of anonymity to discuss internal deliberations. Xi is preparing to host more than 40 world leaders at the second Belt and Road Forum in Beijing in late April.
Stocks Edge Lower
Asian stocks had a mixed open after most U.S. benchmarks drifted lower into the close. The S&P 500 fell to a one-week low as the drop in health-care providers extended amid concern about policy changes and the latest batch of corporate earnings did little to boost confidence in the economy. The yield on 10-year Treasuries was virtually unchanged after climbing to a four-week high and the dollar fell amid data showing the U.S. trade gap unexpectedly narrowed. European debt also dropped, while the euro strengthened even as Germany’s economy ministry revised its growth forecast lower.
FTSE 100 Trading Signals, Forecast and Prediction
Today is that last trading day of the week until trading resumes on Tuesday so I am treating today like a Friday. The bulls failure to push on yesterday, coupled with the drop on the S&P has turned the FTSE bearish with 2 hour resistance at 7469 to start with today. There is also key daily resistance just above this at 7480, so it is this area that the bulls still need to break. If so then the 7510 level is next up, but the chance of a load of buying before a long break is unlikely. Especially as the markets have been pretty cautious all this week, and in fact since the Brexit extension was announced.
Coupled with that 2 hour resistance level, we also have the daily pivot and 30min coral so this area looks to be worth an initial short. If we did pop up to that 7510 level then I have pout a short order in here, but not totally convinced that we will see that higher level today.
For the bears we still have the 7444 support level as per yesterday (shame it just missed the long order as it was a decent climb off it yesterday) and the bulls may be keen to defend this. If not then a drop down to the 7415 level looks likely, and this level looks key as it is a rising trend line on the daily chart. Below this then 7384 is still lurking as the next support.
I think we may well see a bit of caution today, and possibly profit taking ahead of the break. We are just sitting on S1 at 7451 as I write this so we may see an initial hold of that for the climb up towards the resistance levels. The Asian markets were weaker today as well so that may well carry though to our sentiment.
Looking therefore to short the climb today, it was a bit of a shame that we didn’t manage to reach that 7530 area this week (so far anyway) as that still looks decent as its the top of the 10 day Raff channel.
Good luck today – be a little bit more cautious, and have a nice long weekend.
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