FTSE 100 Outlook for 11th October 2019
- Chinese delegation arrives in Washington for trade talks
- Stock markets advance as Trump tweets that he will meet with Chinese Vice Premier
- UK economy shrank by 0.1pc in August, but July and June’s figures were both revised upwards, brightening the overall picture for British growth
Miners provided the biggest upwards pull on a fairly flat FTSE 100, with the materials sector up more than 2.2pc overall.
Hopes that talks between US and Chinese officials will result in a trade-war breakthrough lifted shares in the sector, which would stand to benefit strongly if the current malaise over global trade lifts.
Optimism is bolstering commodity prices, with base materials such as copper, zinc, lead and tin all strengthening during Thursday’s session. Chilean miner Antofagasta was the biggest riser, up nearly 4.5pc, or 37p, to 864p, with Anglo American. Glencore, Rio Tinto and BHP all also rising.
The FTSE 100 closed up just under 0.3pc. It was lifted by upbeat sentiment as Chinese officials arrived in Washington DC for a crunch summit ahead of the introduction of new tariffs.
However, the blue-chip index was put under pressure in the closing minutes of London trading by a surging pound, which rose rapidly on hopes of a Brexit deal after a meeting between Boris Johnson, the Prime Minister, and Leo Varadkar, the Irish Taoiseach. Brexit-exposed stocks including retail banks and supermarkets performed strongly during the day as sentiment around the UK’s exit from the European Union improved.
Deal in Sight?
A mini-deal may be on the cards in the latest development of the highly scrutinized U.S.-China trade talks. President Donald Trump said the first day of high-level trade negotiations between the U.S. and China went “very well” and will continue ahead through Friday when he’ll meet the top Chinese negotiator. S&P 500 futures extended gains after the news. The news must come as a relief for traders. One estimate predicts the S&P 500’s decline in the event of another breakdown would be more than double its potential gain if the two sides reach some kind of truce. Still, Trump has said he would prefer a complete agreement, rather than the partial deal that appears to be on the table. Meanwhile, China was been hit by steel tariffs as high as 66.4% from the European Union.
Market Optimism
Asian equities took its cue from the rally on Wall Street, HK outperformed whilst Mainland remained cautious as U.S.-China trade talks progressed into a second day. Treasury yields jumped, U.S. equities climbed and futures rose in Tokyo, Sydney and Hong Kong. Ten-year Treasury yields rose to 1.67%, while the yuan climbed and the dollar declined. Elsewhere, the pound touched the highest level in two weeks against the greenback after U.K. and Irish leaders said that there may be a possible “pathway” to a Brexit deal. Crude rose after OPEC Secretary-General Mohammad Barkindo said members and allies including Russia will do “whatever it takes” to prevent another oil slump as the global economy weakens. Gold fell 0.8% to $1,493.28 an ounce.
Brexit ‘Pathway’
The pound jumped the most in seven months after a positive meeting between U.K. Prime Minister Boris Johnson and Irish premier Leo Varadkar, who identified a “pathway” to a potential deal. Varadkar said he believes a deal is possible before the end of the month, and urged negotiators to resume talks in Brussels. Just a few days ago, Varadkar said it’s hard to see the impasse over Brexit breaking before next week, while Johnson had commented that a deal was “essentially impossible.”
FTSE 100 Outlook | Trading Signals | Forecast | Prediction
Interesting end to the day yesterday with a fair few swings as the S&P500 dropped off the 2849 resistance level and took the FTSE down with it late afternoon. The FTSE managed to poke its nose above 7200 to 7211 before dropping back as the US markets dropped. We are being driven by Brexit and trade talk at the moment. The US and China are in discussion at the moment, while hopes of a Brexit deal looked a bit more likely last night. Till the wind changes again!
For today we have initial support at the 7140 level and if we get an initial drop down to here then we may well see a bounce back up to retest the 7200 level. I am still awaiting a test of the 25ema on the daily chart, which has now dropped down to 7236. As such if we get a rise to this level then a short off this level looks good still. The S&P has moved above its 25ema and is now testing the recent high at 2955. Support is down at 2922 and 2916 for today so if it drops down to here then a long here looks to be worth a go.
On the FTSE, below 7140 then we have the fib at 7116 and this is the recent low area from yesterday evening. Below this then 7090 is next up.
The trend is bearish on the daily chart as you can see from the Raff channels heading down, so a rally up to that daily moving average and then a subsequent drop would fit quite well, but the bulls will need to be quick out the blocks today. With the messy backdrop and the failure to hold onto the gains above 7200 yesterday the bears do seem to have the upper hand.
The ASX200 (Australia) had a dip and rise pattern today and we may well get something along similar lines. Especially if the S&P drops off from this 2955 double top level. Cable moved higher yesterday on hopes of a deal, which helped suppress the FTSE. If that recoils a bit from the 12500 area then it may well help the FTSE to rise.
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