Technical analysis for FTSE 100 for 30th May 2024
London's blue-chip stocks dropped on Wednesday for the six straight session as traders pared back bets on the timing of Federal Reserve interest rate cuts, while Anglo American fell after Australian resources giant BHP Group walked away from its $49 billion takeover pursuit.
Earlier in the day Anglo rejected BHP's last-ditch request for more time to discuss a takeover offer, dismissing it as highly complex.
The blue-chip FTSE 100 closed 0.9% lower, in its longest losing streak since August 2023. Meanwhile, the mid-cap FTSE 250 also ended 1.3% lower, logging its worst day in over a month.
U.S. Treasury yields rose after data showed a sharp improvement in U.S. consumer confidence measure for May that prompted investors to lower their bets on a rate cut in September.
Later in the week markets will look to the Fed's preferred inflation gauge - the Personal Consumption Expenditures (PCE) price index data and the Bank of England Governor Andrew Bailey's speech.
Asia & Overnight
Asian stocks were a sea of red on Thursday and bonds slid on bets global interest rates would stay higher for longer, as investors looked to key inflation readings at the end of the week for further clues on the future path of monetary policy.
The dollar rode U.S. Treasury yields higher while gold remained under pressure on renewed expectations that the Federal Reserve is unlikely to cut rates any time soon. The latest halt in the global risk rally has come on the back of data pointing to lingering inflationary pressures across major economies.
Nasdaq futures slumped 0.45%.
A Fed survey on Wednesday showed U.S. economic activity continued to expand from early April through mid-May but firms grew more pessimistic about the future while inflation increased at a modest pace.
Across the Atlantic, data the same day showed German inflation rose slightly more than forecast to 2.8% in May, ahead of the wider euro zone bloc's reading on Friday.
The main highlight of the week for markets, however, is Friday's U.S. core personal consumption expenditures (PCE) price index report - the Federal Reserve's preferred measure of inflation. Expectations are for it to hold steady on a monthly basis.
Oil prices rose slightly, recovering some lost ground from Wednesday on worries over weak U.S. gasoline demand and higher-for-longer interest rates. Brent steadied at $83.60 per barrel while U.S. crude ticked 0.03% higher to $79.25 a barrel.
Stagflation & Fed
Wednesday’s Beige Book told a story of stagflationary risks to the US economy, likely keeping the Federal Reserve on hold for several months. In most situations, the Fed would be raising rates with inflation this high. But Fed officials are hewing closely to their hike-and-hold rate policy, believing that this will eventually slow the economy. For markets, it means current valuations aren’t sustainable if inflationary risks crystallize and the Fed is forced to hike again.
We have run so far so fast in terms of long-term yields retreating from 5% and stocks pricing in a benign rate environment that, with earnings season behind us, there are no big upside catalysts on the horizon. It may not be until September that we finally get one.
So think of the summer as a consolidation period, because US asset markets seem to be setting us up for some big catalysts in the autumn. It’s only then that we’ll know whether inflation is coming down sustainably enough to allow the Fed to cut. It’s in September and October that we’ll have the trifecta of earnings, inflation prints that really matter, and an election season entering its final stages. After that volatile period, we’ll truly know whether this bull market has staying power.
FTSE 100 technical analysis for today, 30th May 2024
The bears continue to capitalise on the change in sentiment and have broken below the 8200 level now, with the 8100 level in their sights. Initially today though we have support at the 8122 level, along with 8102 for the bottom of the 20d Raff channel. I have split these with the order today and am thinking that we will see an initial rise.
If the 8100 area holds as support then we may well see a bounce up towards the 8194 daily pivot level, ahead of the PCE inflation news tomorrow. The bulls will of course be seen to break this as that would open up a test of the 8260 area and a test of the 30m 200ema. That might be a big ask for today though we could well see some buy the rumour, sell the news kicking in.
It's also the last day of the month tomorrow so a rise today for a month end pump and to not have such a negative close to May could play out also.
Below the 8100 level then 8085 is S2, with the 10d Raff channel bottom also in this area. As such, the bulls will certainly be keen to defend this area. The ASX200 actually put in a bit of a bounce Thursday and we may well do the same. The FTSE100 may well feel like it has been a bit too bearish and dropped a bit too far too fast.
At 1330 we have some US GDP growth rate news out with a forecasted drop to 1.3% - that may well also lead to a bit of chop around then.
It feels like we may well see the bulls strep up to the plate on the S&P500 and the DAX40 as well today and an initial rise across the board may well play out as we rise towards the resistance levels on the 2h charts. I am looking at 8200 FTSE100, 5280 S&P500, and 18570 Dax40 as the main levels.
Good luck today.
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