4th June 2019
Fears that Donald Trump’s widening trade war could push the world economy into recession triggered a flight to safety on rattled global markets on Monday. Prices of safe haven assets leapt in value following the US president’s surprise threat to open up a new front in the trade war by hitting all Mexican goods with a 5pc tariff. The US two-year Treasury yield was at one point on course for its biggest two-day decline since the depths of the financial crisis as investors brace for multiple cuts in interest rates.
The UK’s manufacturing sector tumbled into contraction territory for the first time in almost three years in May as businesses unwind the huge stockpiles built up ahead of Brexit.
The closely-watched purchasing managers’ index (PMI) suffered a shock drop to a score of 49.4 last month, the factory gauge’s lowest level since the immediate aftermath of the EU referendum (any score above 50 indicates growth).
Businesses pinned subdued new orders on record stockpiling reversing and new export business dropping at its quickest pace in more than four years amid slowing demand from Asia and Europe.
U.K. retail sales declined by the most on record in May, with sluggish growth in online sales and Brexit-related uncertainty taking a toll. Total sales fell by 2.7%, the biggest drop since at least 1995 when excluding any distortions caused by the timing of Easter. While some of the drop can be accounted for by comparing to last year — when sales were boosted by sunshine, the World Cup and a royal wedding — political and economic uncertainty played a significant role, the British Retail Consortium and KPMG said. On a like-for-like basis, sales decreased by 3% from a year earlier. Online sales of products apart from food grew just 1.5%, an all-time low, the BRC reported. On a three-month basis, sales of non-food items in stores dropped 2.7%.
Silicon Valley Targeted
Antitrust scrutiny rattled Big Tech. Regulators split up oversight in apparent preparation for probes into whether the firms’ practices harm competition. The FTC will look at Facebook and Amazon as the DOJ examines Google, people familiar said. The Justice Department will also oversee Apple, Reuters reported. Google parent Alphabet fell to a five-month low and Facebook plummeted 7.5%, the most since July. Amazon and Apple also fell.
Futures in Japan, Australia and Hong Kong showed modest gains despite a general U.S. equities selloff. The Nasdaq-100 Index extended losses from a record in May to more than 10% as the FAANG cohort of tech companies was said to potentially face federal probes on antitrust activity. The bond rally marched on, with 10-year Treasury yields dropped to their lowest since September 2017. The greenback lost ground against all of its G-10 peers after James Bullard became the first Fed board member to publicly call for a rate cut amid the trade war. Oil sank and gold jumped.
Donald Trump kicked off his U.K. state visit, saying a trade deal was possible once Britain “gets rid of its shackles” by leaving the EU. The president met Queen Elizabeth at Buckingham Palace, with protesters outside. He also took time to call London Mayor Sadiq Khan a “stone cold loser” and complain about CNN’s coverage of his visit by suggesting a boycott of owner AT&T.
FTSE 100 Trading Signals, Forecast and Prediction
The poor data dropped it down to 7080 yesterday, but the Raff channels lows at that level held and we then got a 100 point bounce. Certainly frustrating for the orders. So what can we expect today? The price getting back above 7130 is a good sign for the bulls, and keeps alive the chance of a test of the 7230 and 7245 resistance areas. They may well be seen today, if the bulls can break above the 200ema on the daily at 7183 this morning.
With the rise yesterday the 2 hour chart is showing support at 7134 so I think that if we get a dip down to this area a long here is worth a go for a run towards that 7183 level, and possibly the 7230. I have taken a short order at the lower of the supports, with a stop above the 7245 one. Above the 7245 level then we are looking at a rise towards 7275. Having tested the bottom of the 10 day Raff channel yesterday at 7080, the top of that channel is at 7237 today, so a full crossing in 24 hours might well lend weight to that area being resistance for today.
If the bulls can keep the price above the 7160 area in the main, then the 2 hour coral line should go green and lend weight to a rise over the next few sessions. However, with the 200ema on the daily at 7233, then bulls will need to be pretty strong to break above this area.
So for today I am looking at support at 7135 and resistance at 7183 and then 7230 and 7245. Should they really go for it, 7275 above that.
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