11th June 2019
The FTSE 100’s surge extended into a sixth straight day after Donald Trump backed down on tariffs targeting all Mexican imports following a deal to beef up border security. A joint declaration revealed that Mexico “will take unprecedented steps” to reduce the flow of migrants as the US called off a 5pc tariff scheduled to hit its neighbour’s goods on Tuesday. The US president was forced to defend the deal after a report claimed that many of the commitments in the agreement had already been made by Mexico before Mr Trump’s tariff threat.
The relief sweeping markets helped stocks build on their strongest weekly gain of 2019. After being boosted by hopes of central bank stimulus last week, the FTSE 100 advanced a further 43.60 points to 7,375.54 as a sixth day of gains boosted the index to a five-week high.
The S&P 500 jumped 1.1pc in afternoon trade in a strong start to the week on Wall Street, while the Mexican peso enjoyed its best day of 2019, gaining as much as 2.7pc versus the dollar.
Car Production, Slide in GDP
The economy suffered its biggest contraction in three years in April after car production collapsed as Brexit uncertainty forced manufacturers to shut down factories. GDP slid 0.4pc in April compared to the previous month as the services sector stagnated and manufacturing production tumbled 3.9pc, the biggest drop since 2002.
Car production slumped 24pc after companies brought forward or extended shutdowns that normally take place in the summer. Manufacturers planned for temporary outages to follow the UK’s initial departure date from the EU amid fears that a no deal Brexit would disrupt “just-in-time” production.
Office for National Statistics head of GDP Rob Kent-Smith said there was “widespread weakness across manufacturing” as record stockpiling ahead of Brexit started to unwind. “GDP growth showed some weakening across the latest 3 months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production,” he said.
The National Institute of Economic and Social Research warned that the economy is now on course to contract 0.2pc in the second quarter following a “marked slowdown”. Economists largely pinned the slump on temporary factors but warned that the underlying picture remains weak amid subdued business investment.
Trump Warns Xi
Donald Trump warned that tariffs on China will go up if Xi Jinping won’t meet at the G-20 summit in Japan. “I think he will go, and I think we’re scheduled to have a meeting,” the president told CNBC, adding Beijing is “going to have to make a deal.” Trump renewed his attack on the Fed, complaining it not having the power over the Fed that he says Xi wields over China’s central bank. “The head of the Fed in China is President Xi,” he said. “He can do whatever he wants.”
FTSE 100 Trading Signals, Forecast and Prediction
After a pretty flat day yesterday with just a small range in play of 20 points, we might get some more movement today. The FTSE bulls have managed to bring it up to test the 7392 area where we have the daily coral, but with the positive news backdrop for once its underpinning the strength. If the bulls can break above 7392 then I am looking at a rise towards the 7420 area where we have the R3 and fi level for today. Above that then the top of the 20 day Raff channel is at 7440, with the 10 day above that at 7472. If the bulls can hold onto a gain above 7400 today then it really keeps things bullish for the short term.
The daily chart has gone bullish also, as mentioned it might yesterday. The 25ema is now locking in as support at 7290 so should we see a drop down to that area in the next few sessions that is probably a swing long area. For today though, initial support is at the 7366 daily pivot level and I have gone for a long off this area for a climb through 7400. Should the bears break below this pivot then a drop down to 7312 looks highly likely, and that brings some decent support levels into play at that area. That is the pink arrow and we may well see a decent bounce around that 7310 level.
Watching the 7392 level initially this morning to see of the bulls can break through that, but we may well see an initial dip and rise playing out from that area.
Looking at the daily chart a path of 7392ish > 7290ish > 7450 + would pan out quite well and fit the technicals quite well so bear that in mind. Interestingly, the S&P 2 hour chart has gone bearish with resistance at 2898, and we dropped off the daily coral yesterday at 2904.
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