Quote from Nick on 4th March 2020, 10:10 am

FTSE 100 live outlook prediction analysis for 4th March 2020

The US Federal Reserve has shocked investors with a 0.5pc emergency cut to interest rates to counteract the economic impact of the coronavirus. In an unexpected announcement, the US central bank said the outbreak “poses evolving risks to economic activity”.

“In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent,” it said in a statement. US shares, which surged on Monday, swung wildly in the wake of the announcement.

The Dow Jones closed 2.95pc lower as sell-off resumes after Fed rate cuts. It dropped a total of 800 points during the session, as investors worried the emergency cut would not be enough to combat the economic impact of the coronavirus. It comes as US 10y yield dropped more than 1pc for first time.

Stocks in London ended in positive territory with the FTSE 100 up 0.96pc and the wider FTSE 250 2.18pc higher. Traders were optimistic for the G7 conference call earlier in the day but the news turned out to be rather unexciting. Equity markets were boosted by the Federal Reserve surprise decision to cut rates but quickly handed back the gains shortly after which may have been a sign that the market was already expecting a 50bps cut this month.

Emergency

The Federal Reserve slashed interest rates by half a percentage point in the first such emergency move since the 2008 financial crisis, amid mounting concern that the coronavirus outbreak threatens to stall the record U.S. economic expansion. The rate cut, which came between the central bank’s regularly scheduled meetings, was announced hours after Group of Seven finance chiefs held a rare teleconference to pledge they’d do all they can to combat the fast-moving health crisis. “My colleagues and I took this action to help the U.S. economy keep strong in the face of new risks to the economic outlook,” Fed Chairman Jerome Powell told a hastily convened press conference in Washington on Tuesday. “The spread of the coronavirus has brought new challenges and risks.” Investors weren’t impressed by either the G-7 promise or the Fed’s move. After rallying earlier in the week on anticipation of action, the S&P 500 index fell more than 3% while the 10-year Treasury yield plunged below 1%. Traders are betting that the Fed will have to do more, with the futures markets pricing additional easing later this year. Here’s what the market didn’t like about Powell’s scant tools.

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FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis

We had a pretty big range yesterday with the drop down to 6500 then climb back, and that volatility is set to continue. The media are really ramping it up and we The short off 6850 worked wonders yesterday and we finally found support at the 6600 level and saw a bounce. Overnight the bulls have managed to defend the 6700 level though and it looks like we are going to open around this area. The 30min charts don't look too bad first thing this morning and show that we may well get an initial rise this morning, towards the R1 level at 6788 initially. Above this them a retest of the 6850 level is probably going to happen, with the daily resistance at 6924 higher up. With the volatility as it is, if the bulls do go for it, now the shock of the Fed rate cut has worn off, we can't discount a 200 point rally! That said, we also have the top of the 10 day Raff channel at 6760 for some early resistance as well.

Should the bears break below the daily pivot level of 6691 then a drop down to test yesterday's low is probably going to play out, at the 6600 level. Below this then 6579 is the 2 hour moving average support again (the one we climbed off at 6550/6500 on Monday) with S1 at 6535 below that.

With the sell off after the Fed rate cut yesterday, I have a hunch that they will want to get a rise today just to prove that it wasn't a panic move thats going to really upset the markets. The SP will be keen to defend the 3000 level again, as it did last night with the snap back from 2980. The top of the 10 day Raff channel on that is at 3088 so a rise to this area looks possible today. The 3130 level certainly got a reaction yesterday, despite the spike higher as the cut was announced.

So for today, looking at a long early on from the daily pivot and 6700 area and see if we do get a rise towards 6760 or higher.

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