30th August 2019
- Sterling falls for second day on Brexit news — markets fear the worst is yet to come
- Europe joins strong relief rally as China calms the tone on trade tariffs
- US stocks join the rally as investors make tentative return to risk
Markets closed Thursday well by recent standards, with end-of-summer quietness and trade optimism proving a recipe for stock success. The FTSE 100 dragged its feet slightly, with a big weight from Micro Focus offset by a slightly fall in the pound’s value. If the blue-chip index can pull off a strong enough performance today, it will avoid leaving August behind as it worst month in four years.
China set the tone for a trade war relief rally on Thursday, striking an emollient note on the tariff tit-for-tat between the Asian manufacturing giant and the United States. Calmer heads appeared to have prevailed in Beijing, with Gao Feng, a Chinese Ministry of Finance spokesman, saying mid-morning London time that China would rather discuss removing the latest duty increases promised by US president Donald Trump than continue the countries’ escalations of levies. “China has ample means for retaliation, but thinks the question that should be discussed now is removing the new tariffs to prevent escalation,” said Mr Gao.
Trump Promises Talk
President Donald Trump said Thursday that the U.S. and China would talk trade following signs from Beijing that it wouldn’t immediately retaliate against the latest tariff increase — but by early afternoon in Washington, neither side had confirmed whether a conversation had taken place. The announcement comes as Trump is under increasing pressure from Republican senators who say that uncertainty on trade is contributing to a U.S. economic slowdown, with more Americans now laying the blame on the president for the deceleration. Trump’s reply to the criticism: “We’re winning.” Meanwhile, China is said to be prepping for the possibility of a no-deal scenario, thanks to Trump’s “flip-flop” diplomacy style.
Markets to Gain
Stocks in Asia tracked the U.S. rally after China indicated it wouldn’t immediately retaliate against the latest American tariff increase, while Treasuries edged down and a dollar gauge hit a two-year high. Futures climbed in Japan, Hong Kong and Australia on the final trading day of a tumultuous month dominated by the trade war. The S&P 500 Index rose for a second day after a spokesman for China’s commerce ministry said that escalating the conflict won’t benefit either side. Investor sentiment remains fragile after President Donald Trump’s recent pronouncements on trade and as investors await a resolution. Elsewhere, West Texas crude held at about $56 a barrel, the pound slipped on Brexit risk, and Italian bonds rose as the country moved toward forming a new government.
FTSE 100 Trading Signals, Forecast and Prediction
Month end today and we may see a little push up so August isn’t as bad as it was looking at one point earlier this month. We have rallied from the 7000 level and are now nearing the 25ema on the daily at 7222 and we may well see some resistance at that area, or certainly some profit taking ahead of the weekend and month end. Generally speaking my bullish optimism from yesterday is continuing for today though, and I am thinking that should we get a dip down towards the pivot at 7157 then a long here is worth a go today.
Should the bears break below 7157 then a drop down towards 7125 looks likely, with that previous resistance area from earlier this week becoming support for now.
We topped out at 7200 yesterday at the top of the 10 day Raff channel and that has widened up to 7268 now, so the worm is starting to turn with the trends creeping up over the previous 10 day worth of candles. It will be interesting to see if the bulls can rise through 7220 though, at least on the first test of that area. If they can then I expect a rise towards 7300 is on the cards, trade tweets notwithstanding!
As its Friday it can pay to be a little bit more cautious so I am planning on slightly lower stakes, but slightly wider stops on those trade plan trades below, hence the 20 point stops.
There are some fairly positive signs from yesterday regarding the US/China trade wars so we may see that fuel the bulls for the next week or so. We are still at 26/100 on the fear/greed scale, so still plenty of upside available.
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