FTSE 100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help
The FTSE 100 closed lower Wednesday, weighed by weakness in consumer staple and healthcare shares, while investors awaited the Federal Reserve’s interest rate decision later in the day. The blue-chip index shed 0.9pc, with drugmakers Astrazeneca and GSK, as well as consumer giants Diageo and Unilever among the top drags.
Stocks rose, bonds jumped and the dollar remained lower Thursday amid a bout of investor relief after the Federal Reserve raised interest rates as expected while countering fears of super-sized hikes.
An Asian share gauge was up about 1%, helped by Hong Kong and China, where there are hopes for steps to support an economy hit by Covid lockdowns. U.S. futures steadied following the S&P 500’s biggest advance since 2020.
Jerome Powell has announced the biggest interest rate rise in 22 years and warned of further punishing increases to come as the US Federal Reserve battles to control rampant inflation in the world’s largest economy.
The central bank raised rates in America from 0.5pc to 1pc in its first increase of more than 0.25 points since 2000.
Mr Powell, the Fed chairman, admitted that inflation is “much too high” and said that further 0.5 point increases are likely to be needed within weeks. Wall Street surged as markets cheered Mr Powell’s calming of nerves over a possible 0.75 point rise, with the S&P 500 closing 3pc higher in the biggest one-day jump since May 2020.
It comes as the Bank of England is expected to raise its own interest rate from 0.75pc to 1pc on Thursday as voters go to the polls in local elections. The increase will pile further pressure on households already battling the highest price rises in 30 years and a series of tax increases.
Mr Powell said he hoped to avoid triggering a recession, arguing the economy’s “underlying momentum remains strong” despite GDP shrinking in the first three months of the year amid growing fears of stagflation.
“The current picture is plain to see: the labour market is extremely tight and inflation is much too high,” he said.
Half-Point Hike
The Federal Reserve delivered the biggest interest-rate increase since 2000 — a half percentage point rise — and signaled it would keep hiking at that pace over the next couple of meetings, unleashing the most aggressive policy action in decades to combat soaring inflation. The Fed will begin allowing its holdings of Treasuries and mortgage-backed securities to decline in June at an initial combined monthly pace of $47.5 billion, stepping up over three months to $95 billion.
Stocks Roar
Stocks rallied the most since May 2020 and Treasury yields fell after Fed Chair Jerome Powell eased concerns the central bank will embark on a more aggressive pace of tightening. Futures rose for Australia and Hong Kong following the 3% jump in the S&P 500. Chinese markets resume trading Thursday after a three-day break amid lingering skepticism over whether Beijing is doing enough to support slowing growth and ease up on regulatory curbs. Later in Europe, the Bank of England is expected to raise interest rates to their highest level in 13 years
FTSE 100 live outlook prediction analysis for 5th May 2022
Midday today sees the BoE interest rate decision hot on the heels of the large hike by the Fed as mentioned above. The forecast is for another 0.25% to take rates up to 1% and that is probably priced in now. For today therefore this is the big event, but I am thinking that we will see a dip down to the pivot and then climb from there.
That would fit with the S&P500 as well as that is on resistance at 4300 as I write this and also looks like a drop down to the pivot and then a bounce may well play out, with 4250 being the support now.
7585 was our FTSE100 resistance level from yesterday and that has capped proceedings so far, and ties in with todays key fib at 7589. Above this level then the 7645 daily level is the next one of note, along with R2 at 7640.
Support wise, the bears would be looking to break below the daily pivot at 7542, but we also have the green 30m coral at 7551 for today to start with. Below this though 7520 is the 30m 200ema. With the 2h chart going bullish now, and showing the 7543 level as Hull MA support as well. Another element to lend support to this area.
The daily chart is also locking into a new bullish trend again with the 25ema support at 7516, so if the bears were to take it down to that 7520 level we have this for extra support – and a possible swing long level for more upside during early May.
The “sell in May and go away” may well pan out towards the end of the month though seasonally we are still in a bullish period. I mentioned yesterday that we have had decent rallies after the Fed for a few sessions and we may well see that again, especially when we have had a bear run approaching the news release, as we had again this time.
So, not too much more to say really. Don’t forget the BoE at 12pm… looking like a dip and rise sort of day!
Good luck today.
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