3rd October 2019
- World Trade Organisation clears US to hit $7.5bn of EU exports with charges in response to illegal Airbus aid
- FTSE 100 hits 45-month-record fall as European shares take a hammering
- Fourth quarter suffers worst start since 2014
- Pound slips slightly, with Brexit news leaving currency largely unmoved
The FTSE 100 closed with its biggest drop in 45 months, down 3.23pc to 7,127.80, knocked by poor economic data, trade war fears and Brexit doubts. The FTSE 250 ended 1.99pc lower to 19,476.91 while Paris’ CAC and Frankfurt’s DAX both closed 3.12pc and 2.76pc lower, respectively.
The energy sector was the worst-performing part of the FTSE 100, which suffered its steepest one-day drop since January 2016 – surpassing falls during last December’s sell-off and the post-Brexit vote turmoil.
A cocktail of headaches sent shares in 98 of the FTSE 100’s companies down during today’s session, as a WTO ruling on Airbus opened the door for Washington to impose $7.5bn in tariffs on the EU. UK construction data disappointed, Brexit remained in a deadlock, tensions continued in Hong Kong and US jobs data disappointed.
Slowdown Fears
Good news is hard to come by in markets right now. The S&P 500 has suffered its first back-to-back drops of more than 1% this year and questions are floating about recession, after U.S. private payrolls fell shortof expectations Wednesday, and a key U.S. manufacturing gauge dropped to the lowest in a decade and car sales sank a day earlier. Meanwhile, investors are getting tetchy over the fact that the stock market hasn’t budged for almost two years, after the S&P 500 losses just undid weeks and months of progress. Elsewhere, Hong Kong retail sales suffered a record slump in August, while Kyle Bass has predicted a “severe” economic decline there.
Asian Markets Slide
Asian stocks followed U.S. stocks down amid increased concerns about a global slowdown. Shares fell about 2% in Tokyo and Sydney, with more modest declines in Hong Kong. Stock markets in China and South Korea are closed. The 10-year Treasury yield fell for a fifth straight day to 1.6% on U.S. hiring numbers. The yen rose versus the dollar and gold spiked above $1,500. Elsewhere, oil fell to the lowest level in almost two months after swelling inventories in the world’s biggest economy added to a pessimistic and weakening economic backdrop.
FTSE 100 Trading Signals, Forecast and Prediction
The markets, and the FTSE 100 in particular were like a runaway train yesterday crushing the longs in their path. With such a large fall, the next day can often see an up tick as some bargains and over reactive price drops get bought up. However, it still looks pretty weak out there and the news background is pessimistic at best!
That said we are at the bottom of both the Raff channels first thing, with support here at 7085, and the S&P has held its support at 2880 so far. On the S&P, if 2880 holds then I am still thinking that a rise towards 2900 and 2950 is possible. On the FTSE, if the bulls can defend initially (having licked their wounds and regrouped) then a rise towards 7155 looks possible.
If the bulls were above to break above 7155 then a slightly healthier looking 7192 is the next area of resistance. Above this then the 2 hour chart (which is now converted to firmly bearish) shows resistance at 7280 – tying in with previous support (supposedly!) becoming resistance. The daily chart also has moving average resistance at 7280 so should we see a mega rally today to this area we may well hit the skids again at this area.
The Australian markets had a flat day really, with a couple of attempts to rise and it’s a pattern that we may also see. With the news backdrop buyers will be cautious but with the trend still up (just, 6890 is bottom of long term trend support) then buy the dippers may get a bit excited after that drop yesterday.
If the bears do drop the FTSE down to start with then I am looking at support at the 7055 level and then 7030 below that. S1 is at 7017 today and we start getting near the psychologically important round number at 7000, where you would expect a bit of a defence. Probably after an overshot just below to 6980 to trigger some stops. 6990 is also the cam break out level.
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