7th May 2019
- US employments falls to 3.6pc, lowest level since 1969
- Huge 263,000 jobs added to buoyant US economy in April
- Services sector returns to growth in purchasing managers’ index
The US central bank has paused its interest rate rises, concerned by the stock market slump in 2018 and signs of slowing global growth. Markets put a 50pc chance of a rate cut by the end of the year but the data from the US has been inconsistent. The dominant services sector stopped contracting in April but managed only meagre growth as the Brexit delay resulted in more uncertainty for companies.
US stocks are ending the week on the front foot following the bumper job figures.
The Dow Jones rallied as much as 0.6pc at the start of play in New York but its gains been halved by a services sector gauge dampening the mood on US markets. The ISM non-manufacturing index slipped back in April to lowest level since August 2017, continuing its sharp decline the previous month.
Trade wars
Donald Trump dramatically increased pressure on China to reach a trade deal on Sunday by saying he would hike US tariffs on $200 billion worth of Chinese goods this week and target hundreds of billions more soon. The move marked a major escalation in trade tensions between the world’s two largest economies and sent markets tumbling.
It also heralded a shift in tone from the US president, who had cited progress in talks as recently as Friday. The Wall Street Journal reported on Sunday night that China was considering cancelling this week’s trade talks in Washington in light of Mr Trump’s comments that took Chinese officials by surprise.
A roughly 100-person Chinese delegation had been expected to accompany Chinese Vice Premier Liu He for the talks, according to one Trump administration official. China’s commerce ministry did not immediately respond to a request for comment. But the editor of an influential, Chinese state-run newspaper said Mr Liu was unlikely to go.
Tariff Time
President Donald Trump’s top trade negotiator said the U.S. plans to raise tariffs on Chinese goods Friday, accusing Beijing of backpedaling on commitments it made in negotiations and confirming the substance of Trump’s weekend threats. People familiar said he made them after being told Chinese officials had refused to agree to a deal that required changes to Chinese law, a change with big implications for provisions aimed at ending China’s practice of forcing U.S. companies to share proprietary technology. The U.S. thought those issues were resolved. Still, talks will continue, U.S. Trade Representative Robert Lighthizer said.
Rocky Ride
U.S. futures fell and Asian stocks were mixed Tuesday after Lighthizer’s comments. The Chinese yuan dropped. Prior to his remarks, U.S. stocks had pared losses from a sell-off sparked by Trump’s threat to escalate the trade war, with investors taking solace from news that China will still attend talks this week. S&P 500 futures dropped 0.7 percent in Asian trading after a rollercoaster session in the cash index, and Nikkei 225 futures in Chicago declined. The Australian dollar kept sliding, and the yen ticked higher.
FTSE 100 Trading Signals, Forecast and Prediction
Well on Friday it did feel top heavy around the 7400 area, though I was a bit too early with that short in the end! That area still remains as resistance and the bulls need to break above the 7435 level really to see further upside. For today we have R3 at 7429 and if we were to reach this area, with the trade tariff (once again) backdrop, we may well see a dip from here as profits are taken following the bounce yesterday.
That said there is still a bit of a job for the bulls to get it that high as 7385 is looking fairly key resistance for today. If the bears take control again today we may well see a bearish cross on the moving averages on the daily chart, and that level lock in as resistance.
Initially today I am thinking that we will get a drop back towards the cluster of supports at the 7315 area. Following yesterdays bounce the 2 hour charts on both the FTSE and S&P have gone bullish, with support at 7315 and 2911 respectively. As such I am thinking that we may see an opening drop down this morning then a climb from here toward the 7385 and 7429 levels, though a climb to the latter will need a strong US session.
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