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The FTSE 100 logged its worst daily performance in seven weeks on Wednesday as warnings of even higher inflation in the coming months raised fears of a deep recession in Britain. The FTSE 100 closed down 1.1% and clocked a monthly decline of almost 2% in a brutal August that saw homebuilders, automakers and retailers take the biggest hit.
Inflation is running at a 40-year high of over 10% and with energy bills set to jump 80% from October, it is expected to rise much further. Goldman Sachs warned earlier this week that inflation in Britain could exceed 20% early next year.
Asian stocks slid and the dollar spiked on Thursday as investors greeted September by selling everything that was not nailed down after a month battered by concerns about aggressive rate hikes from global policymakers. Stocks fell with US equity futures on a hawkish drumbeat from central banks and risks from China, pushing up the dollar as investors sought a haven from the volatility in global markets.
Tech firms contributed to a near 2% drop in an Asian share index, while S&P 500 and Nasdaq 100 contracts slid, the latter in part on a tumble in chipmaker Nvidia Corp. over a sales warning.
China’s move to lock down the metropolis of Chengdu from Thursday to tackle Covid also hurt sentiment. It’s the biggest Chinese city to face such curbs since Shanghai’s bruising two-month crisis earlier this year.
The jitters come after the worst month since June for US shares, reflecting fears of an economic downturn alongside restrictive monetary policy to curb inflation. The two-year Treasury yield touched 3.50% for the first time since 2007 amid a bond selloff that also buffeted Australian and New Zealand debt.
This month, both the U.S. Federal Reserve and the European Central Bank are expected to raise borrowing costs aggressively. Overnight, Cleveland Fed President Loretta Mester said the U.S. central bank would need to boost interest rates somewhat above 4% by early next year and hold them there in order to bring inflation back down to the Fed’s goal, and that the risks of recession over the next year or two had moved up.
The ECB’s move on interest rates must be “orderly and predictable”, French ECB policymaker Francois Villeroy de Galhau said on Wednesday, as data showed euro zone inflation had risen to another record high last month, solidifying the case for a 75 basis point rate hike next week.
U.S. stocks ended the month with the worst August performance in seven years. For the month, the Dow Jones Industrial Average fell 4.06%, the S&P 500 4.24% and the Nasdaq 4.64%.
FTSE100 live outlook prediction analysis for 1st September 2022
Here we go, September already and we should see volumes increase as the summer holidays draw to a close. Today we may well get an initial kick up for the new month money but against the current pessimism it may not go too far! The ASX200 was a bit slow to get going but did put in a bit of a rise, and we may well follow suit with the bulls aiming for the daily pivot at 7299 to start with.
That also ties in with the Hull MA on the 2h chart, which is the line we dropped off yesterday at 7375. Its the second test though so wont be as strong, but as it matches the pivot it should see a reaction. Above that then the R1 level is the next key area to watch for at 7345 as we also have the key fib and the 30m 200ema here. Seems a big ask to get that high today but you never know….. start of the new month and all.
For the bears, they will be looking to short any rallies today, and will be aiming to drop the FTSE100 down to the 7207 S1 level as soon as possible. However, we have initial support at the 7240 level this morning with the key fib here, and it has also held that level overnight.
The S&P bears will need to break 3920 and that level looks like decent support today to start with at least, as we have S1 here and the bottom of the 20d Raff channel. The FTSE100 is also at the bottom of its 20d channel here at 7240.
If the bulls do defend the S&P to start with then a rise towards the 3967 daily pivot level may well play out.
The FTSE100 daily chart has gone bearish now, with the EMAs locking in a bearish cross – resistance is now at 7407 on that so should we get any rallies to this line during early September then we may well see some swing short entries around here.
Not too much more to say really, looking at a possible rise and dip to play out as the new month money comes in and then fizzles out!
Good luck today!
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7130 10 day Raff channel tested…..