26th March 2019
The FTSE 100 struggled to recover from its worst day of trading in 2019 as fears mounted over a global economic slowdown. Markets continued to be gripped by growth worries after a key recession indicator flashed red on Friday amid signs of a deepening global factory slump.
London’s benchmark index continued to sink after suffering its worst day in 2019 on Friday as investors fret over slowing growth. After plunging 2pc on Friday, the FTSE failed to rebound, dropping a further 0.4pc, while Japan’s benchmark Nikkei 225 index tumbled 3pc overnight.
The global rout is the first major setback to this year’s strong recovery on stock markets. Nerves over slowing growth sent stocks sliding in 2018 but markets were calmed by trade tensions cooling and central banks ending the reversal of their post-crisis stimulus.
Concerns about the health of the world economy heightened last week as the factory slowdown in the eurozone and US gathered pace and the Federal Reserve, the US central bank, also warned that a gloomier outlook for growth will stop it raising interest rates this year. A key recession indicator on bond markets was triggered on Friday by rising growth fears. The Treasury yield curve inverted for the first time since the financial crisis, a signal that typically indicates that the US economy will suffer a recession in the next six to 18 months. The inversion – when short-term bonds have higher yields than long-term bonds – suggests that markets expect policymakers to imminently cut interests rates in response to an economic downturn.
Fed rate cut?
Investors expect US policymakers to cut interest rates for the first time since the financial crisis by the end of 2019 as recession fears mount on markets. The market’s expectations for a cut in borrowing costs to tackle an economic downturn have more than doubled in just a week after one of the most trusted recession indicators flashed red on Friday. Interest rate swap markets indicate that investors are putting a 70pc probability of the Federal Reserve – the US central bank – reducing rates by December, a surge from 29pc last Monday. The jump marks the first time markets have priced in a Fed rate cut in 2019 as more likely than not.
Brexit Out of May’s Hands
Theresa May lost control over the Brexit process after conceding she doesn’t have the votes to get her unpopular divorce agreement ratified in Britain’s Parliament. The House of Commons voted 329 to 302 late on Monday local time to strip power away from May over what happens next. That paves the way for members of Parliament to demand she pursues radical Plan B options, potentially including a second referendum, keeping the U.K. in the EU’s customs union, or even canceling Brexit.
FTSE 100 Trading Signals, Forecast and Prediction
For today the 7222 level is still resistance on the 2 hour chart and as such still worth a short if seen. We also have the key fib level here for today. Should the bulls push above this level then 7282 is the next area of note where we have the 2hour coral line. It’s a good sign for the bulls that they kept the price above 7100 after Fridays sell off though the news flow has definitely gone negative again, with predictions of doom and gloom, warning signs over bond yields etc etc. Usually a time to buy the dip…..
Above the 7300 level then that 7400 area is still on the cards, though the recent high at 7370 would need to be taken out.
On the support side of things for today, we have 7161 with the 30min coral, and an area that may well see a bounce. Below this then the 7150 low from yesterday is also relevant. Should the bears push below the 7150 then the key fib at 7125 and then 7110 below that are the next levels to watch out for. 7150 is the bottom of both the Raff channels though, so I am thinking that the bulls will be keen to defend this area. If it holds then we may well see bullish end to the month, despite the doomsayer backdrop in the press.
Of course, Brexit rumbles on. Theresa May’s authority was in shreds on Monday night as Parliament seized control of Brexit with the help of three ministers who resigned to vote against the Government. MPs voted by 329 to 302 in favour of a plan by Remain-supporting MPs for a temporary takeover of the Commons that will enable them to decide their own way forward.
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