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The FTSE 100 has concluded its third day of gains this week after investors welcomed a set of new numbers from AstraZeneca and flocked to some of London’s biggest miners. The index added 0.4% to close at 7,672.
Money markets have ramped up their bets on Bank of England interest rate rises after US inflation surged to its highest level since 1982. Traders are now betting the base rate will rise to 2pc by May 2023 – eclipsing previous expectations that it would peak at around 1.75pc.
The base rate currently stands at 0.5pc, with around 37 basis points of increases priced in for March 2022.
It comes after the latest data showed consumer prices in the US climbed 7.5pc in January, exceeding even the worst expectations.
Overnight, bonds extended a selloff during Friday and Asian stocks struggled after a surprise jump in U.S. inflation stoked bets on faster Federal Reserve interest-rate hikes amid febrile speculation about the policy outlook.
Sovereign notes dropped in New Zealand and Australia, where the three-year yield hit the highest since 2019. Treasury futures edged down. The dollar rose.
U.S. and European equity contracts retreated along with an Asia-Pacific stock gauge. The technology-heavy Nasdaq 100 led U.S. declines as Wall Street snapped a two-day winning run.
Treasuries sank Thursday — the two-year yield climbed the most since 2009 and the 10-year punched past 2% — after a surprise jump in U.S. inflation stirred hawkish comments from St. Louis Fed Chair James Bullard.
Bullard said the central bank should hike rates by 100 basis points over the next three meetings. He raised the possibility of considering a move in between scheduled policy reviews.
Other Federal Reserve officials are in no rush to raise rates prior to their meeting next month, nor does a 50 basis points March move appear likely yet.
Markets are struggling to adjust to the withdrawal of pandemic-era stimulus as officials fight inflation. The flattening Treasury yield curve suggests investors expect slowing growth as the Fed increases rates and reduces its balance sheet to curb price pressures.
Inflation Surge
President Joe Biden faces an even bigger battle to enact his spending proposals and retain his party’s control of Congress after a January inflation report that showed an unexpectedly large surge in the cost of living for Americans. Prices rose 7.5% last month from a year ago, the most in four decades, with cities running as high as 9.6%. Federal Reserve Bank of St. Louis President James Bullard said he supports raising interest rates by a full percentage point by the start of July.
FTSE 100 live outlook prediction analysis for 11th February 2022
The bulls once again failed to break the 7700 level yesterday and that remains the line in the sand but following the drop off overnight we are just at some crucial supports to start the day, namely the 7590 level on the FTSE100, the 4465 level on the S&P500 and then 15280 level on the Dax, just above the S1 level.
As such I am thinking that we will see a rise and dip play out today with the FTSE100 getting a climb up to the 7640 level this morning. That would also tie in with the S&P and Dax also climbing to their daily pivots at 4521 and 15444 respectively.
With the weakness after the bearish US session in late afternoon yesterday, the charts are looking more bearish and we have several resistance levels coming into play. The 2h on the FTSE is bearish as you would expect with 7648 Hull moving average support, though just below this as mentioned we have the daily pivot and 30m coral at the 7640 level. Higher up we have the 7688 level where we have the key fib and yesterdays high so should it get there then we may well see a stall here again. I do think that the 7640 area will be decent resistance to start with though.
On the support side of things, 7590 as mentioned which we are climbing from as I write this, but below this then the bears will be looking to 7580 which is daily support, but more crucially the S3 level of 7513. S2 is at 7562 as well to keep an eye on. I don’t think we will get as low as 7513 today though and in fact we are getting quite a few positive RSI divergence signals on the 30m charts on the FTSE, S&P and Dax so lends weight to more of a rise to start with.
Usually Friday caveat applies for today – be a bit more cautious and don’t give away yesterday’s profits!
On the news front we have the GDP figures out today, with YoY dropping down to 6% from 8% previously. GDP fell 0.2% in December and is now in line with its pre pandemic level.
Not too much more to say really, let’s see if we get the rise and dip play out and good luck today. Have a great weekend as well.
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