FTSE 100 live outlook prediction analysis for 11th May 2021
Sterling surged to more than $1.41 as investors celebrated the Scottish National Party’s failure to win a majority in Holyrood’s elections, pushing the prospect of a second independence referendum off the table for now. The rise of more than 1pc against the dollar to a two-month high was matched by a similar appreciation against the euro meaning the pound is worth more than €1.16.
Nicola Sturgeon’s party won 64 seats in the Scottish Parliament, one short of the 65 needed for a majority, which FX analyst John Hardy at Saxo Bank said means international investors can put referendum fears “in the rearview mirror” and buy more UK assets.
At the same time markets reacted badly to Friday’s weak jobs report in the US which saw the unemployment rate creep up to 6.1pc in April, raising fears for the sustainability of the recovery in the world’s largest economy. Tech shares fell sharply in the US, as rising commodity prices are igniting concerns about whether inflation will derail a growth rebound and spoil a record stock rally.
Mutant Strain
The fast-spreading strain of Covid-19 first identified in India will be classified as a variant of concern by the World Health Organization. There are indications of “increased transmissibility” and that the mutant, called B.1.617, can evade key antibodies. Meanwhile, India’s health authorities warned about mucormycosis, also called the “black fungus” infection. The rare but deadly infection found in some Covid-19 patients can disfigure facial features, damage sinuses and lungs and even kill. In the U.S. the Pfizer-BioNTech vaccine was cleared for use in children age 12 to 15, while the U.K. confirmed plans to allow indoor mixing from May 17. Malaysia tightened virus curbs and Philippine President Rodrigo Duterte said he will not compromise on South China Sea claims after accepting Chinese vaccines.
Equities Slide
Stocks look set to drop at the open in Asia after a slide in U.S. equities, as surging commodity prices stoked concern about inflation. Treasury yields rose. Futures pointed lower in Japan, Australia and Hong Kong. Technology shares led U.S. stocks lower, with the Nasdaq 100 Index tumbling 2.6% amid the growing anxiety over inflation, which can threaten longer-horizon revenues typical of the sector. The benchmark S&P 500 Index fell from an all-time high, while the Dow Jones Industrial Average briefly topped 35,000 for the first time. Copper jumped to a record while iron ore futures surged more than 10%.[Bloomberg]
US & Asia Overnight from Bloomberg
Asian stocks and U.S. equity futures slid Tuesday after a technology-led Wall Street tumble as surging commodity prices stoked concern about inflation. A dollar gauge was steady.
MSCI Inc.’s Asia-Pacific share index fell the most since March, with technology underperforming amid a sea of red from Japan to Hong Kong. Nasdaq 100 contracts retreated about 1% after the index tumbled on concern that higher inflation could push up interest rates, weighing on equity valuations. S&P 500 futures dropped after the gauge fell from an all-time high.
Oil dipped as traders monitored the worsening fallout from the closure of the largest U.S. oil-products pipeline. The spotlight remains on the broad commodity rally, which threatens to stoke price pressures. Data showed China’s factory-gate prices surged more than expected in April.
A measure of inflation expectations earlier reached the highest level since 2006. The 10-year Treasury yield eased back slightly after rising to 1.60%.
The run-up in raw materials is intensifying debate ahead of a U.S. CPI report Wednesday that is forecast to show a strong gain in April. The year-on-year reading will be amplified by the pandemic shock a year earlier, but it plays into a broader market concern that the Federal Reserve may be forced to raise interest rates sooner than current guidance suggest to contain inflation.
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
Shame the FTSE didn’t quite manage the 7180 level before dropping, which was blamed on inflation worries in the end, though cable rising obviously played a part as well. In the real world, inflation is probably running at about 20% as so many costs have gone up recently from food to construction supplies. The latter of which are in short supply – concrete, wood, plasterboard and so on. We got a few nice bounces off the supports as it fell though and the bulls will now need to defend the 7000 level where we have the bottom of the 10d Raff channel.
I mentioned yesterday that daily RSI was at 75, with the drop that has now gone down to 57, and as such, it probably won’t be long till the bulls pile back in! The key will be the bottom of the Raff channels holding, as we have had a decent pull back from the top of the 20 day one yesterday.
Initially today we may well get a kick up to the cluster of resistance at the 7075 area – namely the 200ema and 30m coral line possibly converging here. We have dropped below S1 already to start with, but we have S2 at 7010 and just above that 10 day channel so it would be good to see that area hold if tested. Obviously with the drop yesterday the 2 hour chart are bearish again, with 7140 FTSE resistance, 15375 on the Dax, and 4211 on the S&P. Keep an eye on those 3 levels.
Above the 7075 level the daily pivot at 7109 is the next level of note, with 7140/7150 above that. The latter being R1 and also the key fib. Can the bulls be that strong today on a bear Tuesday though? Maybe a bit more of a slide today, consolidate a bit then spring back up tomorrow, possibly helped by the BoE. We will also see the Fed talking it up this week I expect!
Below the 7000 level then 6950 is the next level in play, where we have the bottom of the 20 day Raff channel, along with S3. Should we get that low today then I would really like to see that hold, otherwise we have started the bigger correction and a drop down towards 6750 beckons. Good luck today.
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