FTSE 100 live outlook prediction analysis for 21st January 2021
London stocks rose in the afternoon Wednesday as Joe Biden was sworn in as the 46th US president. Traders are hoping for more action to lift the economy after he secured last week’s stimulus package. The FTSE 100 rose 27.44 points to 6,740.39.
Biden about to turn on the taps? Unlike his predecessor, Biden will have the advantage of combined fiscal and monetary stimulus the likes of which America has not seen since the years after the Second World War. That was a great combination for markets in the short term, but we should remember that it stored up problems down the track. Now as then, the Federal Reserve is acting in concert with the government to support the economy. The Fed has made it clear that interest rates are on hold for at least the next couple of years. They may still be zero in 2024.
The central bank no longer views 2pc as an inflation ceiling but an average target over the cycle. When the high cost of funding a massive deficit is understood, the political pressure on the Fed to keep interest rates lower than they should be will be significant. That is a recipe for rapidly rising prices.
Inflation may seem like a non-problem today. Last week’s consumer price data in the US showed inflation running at 1.4pc, well below the Fed’s target. The latest jobs data show an economy stalling in the face of Covid restrictions.
The background disinflationary pressures of a globalised economy remain intact. But it is worth remembering that inflation always seems like tomorrow’s problem until, quite suddenly, it becomes today’s.
Final Trump Card
China imposed sanctions on former Secretary of State Michael Pompeo and other Trump administration officials just as Joe Biden was being inaugurated as president. China also urged cooperation with Biden’s administration and said it hoped new U.S. officials would make their own judgments on Beijing’s control in Xinjiang. Although Biden and his team are unlikely to match the harsh rhetoric leveled by Pompeo recently, they have indicated they aren’t ready to ease tensions as much as China’s leaders would want.
Record High
Asian stocks looked primed to follow their U.S. peers higher as optimism that recent federal spending will revive growth and bolster corporate earnings pushed the S&P 500 to a record high. The dollar weakened. Futures in Hong Kong, Japan and Australia rose after the tech-heavy Nasdaq 100 Index jumped more than 2% and the S&P 500 posted its best first-day reaction to a presidential inauguration since at least 1937. Treasuries were little changed. Elsewhere, oil pared a rally late in the trading session as concerns over lackluster consumption clouded optimism. Gold and copper climbed.[Bloomberg]
US & Asia Overnight from Bloomberg
Stocks climbed to another all-time high Thursday and U.S. and European equity futures rose on optimism that fiscal spending will revive economic growth and bolster corporate earnings. The dollar weakened.
Asian shares rose for a third session as Chinese stocks outperformed and Hong Kong’s Hang Seng index hit 30,000 points for the first time since May 2019. S&P 500 futures edged higher after the index posted its best first-day reaction to a presidential inauguration since at least 1937. The tech-heavy Nasdaq 100 Index jumped more than 2%. Netflix Inc. was among companies that gained on solid results. Treasuries were little changed.
In China, the nation’s three biggest telecommunications firms said they requested a review of the New York Stock Exchange’s decision to delist their shares. Separately, Twitter Inc. locked the official account of the Chinese embassy to the U.S., citing a violation of its “dehumanization” policy.
Elsewhere, oil dipped as concerns over lackluster consumption amid the pandemic crept back in. The yen was steady after the Bank of Japan kept its main policy settings unchanged. The Australian dollar advanced as the nation’s unemployment rate dropped.
FTSE 100 Outlook | Trading Signals | Forecast | Prediction | Analysis
Biden sworn in yesterday and already the rumblings are starting talking about inflation and the associated rise in gold! Markets climbed well yesterday though and the S&P has risen to the 3865 resistance level and the top of the 10 day Raff channel here. We may see a bit of a dip and rise play out from this level as we get the final push up towards the 3900 area before a bigger cooling off. The 2 hour S&P chart remains bullish though with 3800 as support from the green coral line. The Hull moving average support held well on Friday at 3780 and we have had a decent rise off that.
The FTSE 100, while rising, wasn’t quite as strong as the US markets, almost like it kept the brakes on. We haven’t recaptured the highs from the beginning of January, and the 6810 level remains as resistance on the daily with the top of the 10 day Raff channel here. For today we also have the key fib and R2 at 6805, so of the bulls were to push up to here we may well see a turn back down at this point. R1 is nearly being tested as I write this, at 6782, so we may well get a dip and rise play out initially.
Above the 6810 level then the R3 level of 6848 would be the next level of note, with the recent high at 6957 above that, but with 6905 also worth keeping an eye on.
There is decent support to start with today from the 200ema and 30 min coral line (green) at 6745. That is also just above the daily pivot at 6739 so we may well see this area hold as initial support. A break of 6739 and then S1 and the key fib at 6717 are next up and we may well see that hold. If it does start to get bearish then we may well start heading for the bottom of the Raff channels – the 10 day and 20 day are both at 6580 currently and interestingly the 10 day channel has started heading down.
Where the S&P leads the rest will follow so worth keeping an eye on this 3865 resistance level initially and watching for a bit of a pull back from here.
Good luck today
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