FTSE 100 Analysis | Signals | Forecast | Prediction | FTSE 100 Outlook | Trading help
The FTSE 100 had another positive run with heavyweight mining, energy and banking shares leading gains before the outcome of the US Federal Reserve meeting yesterday. Cyclical rotation into value stocks, away from growth stocks, is helping to underpin the strength in the FTSE100 for the moment. The blue-chip index rose 1.3pc to 7,469.
The FTSE 100 has gained 1.3pc so far this year, significantly outperforming a 4.4pc drop in the wider European stock aggregate, helped by cheap valuations, strong banking and energy gains and a lower exposure to tech.
Oil prices have surged past $90 a barrel for the first time since 2014 as growing tensions between Russia and Ukraine add further fuel to a recent price spike.
Benchmark Brent crude topped the latest milestone, while West Texas Intermediate gained 1.6pc to almost $87.
The stand-off between Russia and NATO over a potential conflict in Ukraine has been the major driving force behind price rises in recent days, but a drop in US inventories compounded supply worries.
The crisis threatens to add even more inflationary pressures at a time when price growth is already at its highest level in decades.
Asia Overnight
U.S. equity futures and Asian stocks slid Thursday after Federal Reserve Chair Jerome Powell signaled a March interest-rate liftoff and stoked speculation about the possibility of unexpectedly aggressive policy tightening.
An Asia-Pacific share gauge sank to the lowest in 14 months, with South Korea set for a bear market, China edging closer to one and Australia off 10% from an August peak. Contracts on the S&P 500, tech-heavy Nasdaq 100 and European stocks retreated. The Fed fallout erased a Wall Street rally Wednesday.
Powell reinforced the Fed’s determination to quell the highest inflation in a generation amid a robust recovery from the pandemic. The central bank also said it expects to begin balance-sheet reduction after starting rate hikes.
Two-year Treasury yields — acutely attuned to Fed policy — jumped in the U.S. session and were at the highest levels since the pandemic’s emergence. A key part of the yield curve was around the flattest since early 2019, hinting at concerns for growth as the Fed dials back economic support.
Bonds in Asia succumbed to losses, including in New Zealand and Australia. The dollar was at a one-month high, while commodity-linked currencies weakened. Oil dipped, gold extended a decline and Bitcoin — whose fortunes have been tightly correlated with stocks of late — wavered around the $36,000 level.
The Fed’s flip to a hawkish stance has roiled stocks and bonds this month. Investors fear that price pressures and receding stimulus will squeeze economic growth and company profits. Markets ramped up pricing of Fed hikes, pointing to a 94% probability of five quarter percentage-point moves in 2022.
Ready for Liftoff
Fed Chair Jerome Powell said the central bank was ready to raise interest rates in March and didn’t rule out moving at every meeting to tackle the highest inflation in a generation. The hawkish pivot, against a backdrop of turmoil in stocks, comes amid consumer inflation readings that have repeatedly surprised and hit 7% — the most since the 1980s. Separately, the Goldilocks period is ending and the world must prepare for a future of inflation, slower growth and labor shortages, value investor Jeremy Grantham said.
FTSE 100 live outlook prediction analysis for 27th January 2022
Well the FED steadied the ship last night… not. We got a fake break up on the news to trap the longs then steadily sold off since, with the FTSE100 futures down at S2 to start with today at 728. We may well see this hold, and in fact I think we will see a kick up on the FTSE, Dax and S&P to start with, as the S&P is also sat on some key support here at 4285 as I am writing this.
However, we may well see some more bearishness later on before a bit of a pump into the close and into tomorrow. Might get that stronger end to the week still!
For the FTSE a rise towards the 7384 25ema level to start with, a possible backtest of 7396 S1 and maybe a final push past that to test the 200ema and the 30min coral at the 7440 area before the bears have another pop.
If they do, then a drop from 7440 could get some decent traction and go as far as the 7290 support level. The recent low at 7225 is below that, though that might be a big ask for today. A lot will depend on the S&P and if the 4285 level holds during today. If it does then the bulls are in the game still, however a break of 4280 and then we will be looking at a drop down to the 4230 area, and again the recent low on this at 4225.
The bulls will be keen to defend any significant drops today, though after FOMC in December we had a very bearish day the next day and then climbed after that which kick started that climb into the year end. Will we see that same pattern?
For the S&P today we may well see this 4285 level hold initially for a rise towards the 25ema resistance at the 4322 level, which would also be a backtest of the key fib, before a bit more of a slide down. I would like to see the 4225 level for a push back up later and into tomorrow.
Likewise on the Dax, an initial kick up to backtest S1 and then a possible leg down to the S2 level at 14960 before a bounce later on today.
So, looking at a bit of a dip and rise day to play out today, with the rise coming later in the day, maybe after the FTSE100 close.
Good luck today.
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