Technical analysis for FTSE 100 for 11th April 2024
UK equities closed Wednesday's volatile session higher as investors pondered the outlook for global rates after hotter-than-expected U.S. inflation data tempered expectations the Federal Reserve would cut rates several times this year. The blue-chip FTSE 100 rose 0.3%, recovering from losses of as much as 0.2% earlier the session, helped by a 3.3% rise in Tesco and banking stocks.
European markets recovered even as Wall Street indexes slid 1% after data showed U.S. consumer prices increased more than expected in March, pushing investors to bet the Fed would delay cutting rates until September.
Tesco's stock rose by as much as 6.5% earlier to touch its highest in nearly 10 years after Britain's biggest retailer forecast a further rise in profit, citing early signs of improving consumer sentiment.
The update lifted shares of other consumer companies including Reckitt Benckiser, Tate & Lyle and Sainsbury's.
Meanwhile, British banks and insurers rose more than 1% each, supported by higher UK government bond yields as traders bet on interest rates staying higher for longer.
Money markets expect 56 basis points of interest rate cuts by the Bank of England this year and they see a 52% chance of the first cut arriving in June, according to LSEG data. That is more than the 44 bps of U.S. rate cuts priced in by investors, with the first cut from the Fed expected in July.
Britain's cost of living crisis shows signs of easing, an FCA survey showed.
Investors will closely monitor the European Central Bank's monetary policy decision on Thursday, and Britain's GDP figures on Friday.
The domestically oriented FTSE 250 gained 0.2%.
ASIA
Asian shares tracked Wall Street lower on Thursday as sticky U.S. inflation forced markets to slash bets on how much Federal Reserve easing might come this year, a result that sent the dollar flying to a 34-year high against the beleaguered yen.
U.S. stock futures , lost another 0.2% after Wall Street slid around 1% overnight, while regional bonds took a kicking following a 20-basis-point jump in Treasury yields overnight to their highest since November.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7%. Japan's Nikkei dropped 0.8%. China's blue chips eased 0.4%, and Hong Kong's Hang Seng index fell 1.1%, after data showed consumer prices in the world's second-largest economy rose by a muted 0.1% in March, missing expectations.
USA
Data overnight showed U.S. inflation in March once again came in hotter than expected, decimating the chance of a rate cut in June. Core CPI advanced 0.4%, above forecasts of a 0.3% rise.
Fed minutes out overnight also showed that officials had begun worrying that inflation progress might have stalled before the March inflation data, with some raising the possibility that the current policy rate was not restrictive enough.
Investors, who had been hanging onto the expectation of a June cut, now see September as the most likely timing for the easing cycle to start.
Investors now await the U.S. producer price data and the European Central Bank policy meeting later in the day. The ECB is all but certain to keep borrowing costs at a record high but the focus is on whether officials would back a rate cut in June.
Bank of Canada kept its interest rate unchanged overnight, and the bank governor said a cut in June was possible if a recent cooling trend in inflation is sustained.
FTSE 100 technical analysis for today, 11th April 2024
The CPI news made things a bit volatile as expected yesterday but the 7920 level held in the end and the bulls managed to capture the 7945 support area and hold it overnight. Initially today we may well see that rise continue to test the 7995 level where we have R1 and then also within spitting distance of the round number. I still have the 8020 area above this as resistance, and we also have 8015 as the key fib today.
Should we get a rise to this level then a drop off from 8015 may well play out later on, especially as the S&P500 2h chart has gone bearish now with the 5190 area as resistance. If that drops it may well bring the FTSE100 with it. 8015 is also he top of the 10d Raff channel and the bulls have not been able to hold any recent breaks of 8000.
Above the 8020 area then 8070 to 8080 is the next level of note, with the former being daily resistance and the latter R3.
Support wise then once again the 7950 is showing, as we have the daily pivot and the 30m 200ema here. Should we test that again then I would like to see it hold, and not get a news driven overshoot this time!
Below the 7950 level then 7909 S1 and 7905 as the key fib for today would be the next longing area. Generally buying the dips is still working out ok, and the bulls just about have the momentum. However, the USA bulls are losing it a bit now and that may well follow through to the UK. The various 10d channels are also heading down now as well.
Today's main news is the ECB rate decision (13:15) with no change expected, remaining at 4.5%. Focus is will be win whether they may cut in June, so the press conference at 13:45 will likely lead to some volatility. Also the US PPI at 13:30, expected to have dropped to 0.3%. It's worth keeping an eye on PMI readings and consumer and business lack of confidence could well lead to a more sustained (mild) recession.
If the US aren't going to be cutting rates anytime soon, (earliest possibly September, if at all) the BoE are unlikely to cut rates either.
Good luck today.
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The world is at risk of a “sluggish and disappointing decade”, the head of the International Monetary Fund has warned, while urging vigilance to restore price stability and jumpstart economic growth.
Kristalina Georgieva, managing director of the IMF, said: “Without a course correction, we are … heading for the Tepid Twenties”. She urged governments to make reforms, including cutting red tape and improving access to capital, that could boost growth.
Inflation is easing faster than expected but has not been fully defeated, she said, urging central bankers to carefully calibrate their decisions on cutting interest rates to incoming data.
She said headline inflation for advanced economies was 2.3pc in the final quarter of 2023, down from 9.5pc just 18 months ago, and the downward trend was expected to continue in 2024.
That would create the conditions for central banks in major advanced economies to begin cutting rates in the second half of the year, although the pace and timing would vary, she told an event hosted by the Atlantic Council think tank.