Technical analysis for FTSE 100 for 10th June 2024
British equities closed lower on Friday, weighed down by mining and real estate shares as investors took stock of a strong jobs report in the U.S. which eroded hopes of a September rate cut by the Federal Reserve.
The blue-chip FTSE 100 slipped 0.5%, marking a fourth straight weekly loss, a streak last seen in 2020. The mid-cap FTSE 250 was down 0.8%, in its second straight weekly loss.
The U.S. nonfarm payrolls data showed that the economy created far more jobs than expected in May, reducing bets of a September cut by the Federal Reserve.
The US economy added more jobs than expected last month in a blow to hopes that the Federal Reserve could start interest rate cuts from September. Nonfarm payrolls grew by 272,000 in May, up from a downwardly revised 165,000 in April, according to the US Bureau of Labor Statistics. Economists had estimated that the US economy would add 180,000 new jobs in May, with the unemployment rate expected to have held steady at 3.9pc.
Money markets indicate it could be December by the time interest rates are cut in the US after the higher-than-expected employment figures. Before the figures, traders had been pricing in an interest rate cut in the US by November. In the UK, traders cut bets on an interest rate cut by the Bank of England in August, although a first move is still priced in for November.
Focus would now be on the Bank of England after the European Central Bank and the Bank of Canada announced their first rate cuts in this cycle earlier this week.
Asia & Overnight
Asian stocks sank on Monday as traders heavily pared back on bets for Federal Reserve rate cuts this year given a still-tight U.S. labour market, while a snap election call in France sparked wider political concerns and weighed on the euro.
Trading was thinned in Asia with Australia, China, Hong Kong and Taiwan out for public holidays, but MSCI's broadest index of Asia-Pacific shares outside Japan still slumped 0.46%.
U.S. futures eased slightly, with S&P 500 futures and Nasdaq futures down about 0.03% each, while the dollar was back on the front foot.
The halt in the global risk rally came on the back of Friday's nonfarm payrolls report which showed the U.S. economy created far more jobs than expected in May and annual wage growth reaccelerated, underscoring the resilience of the labour market.
Futures now show roughly 36 basis points (bps) worth of cuts priced in for the Fed, down from 50 bps last week. The odds for an easing cycle beginning in September have also lengthened.
The latest developments come ahead of the Fed's policy decision on Wednesday, with U.S. inflation figures for May due just before that.
Snap Election
Over in France, President Emmanuel Macron on Sunday called snap legislative elections for later this month after he was trounced in the European Union vote by Marine Le Pen's far-right party.
Macron's shock decision set off a political earthquake in France, offering the far-right a shot at real political power after years on the sidelines and threatening to neuter his presidency three years before it ends.
The euro tumbled to a one-month low in the wake of the announcement amid growing uncertainty over Europe's future political direction. It was last 0.25% lower at $1.07735.
Futures similarly fell, with EUROSTOXX 50 futures losing 0.38% while FTSE futures slid 0.7%. French bond futures shed 0.2%.
Brent crude futures gained 0.13% to $79.72 a barrel, while U.S. West Texas Intermediate crude futures ticked up 0.16% to $75.65 per barrel.
FTSE 100 technical analysis for today, 10th June 2024
Well we are starting the week negatively, as the political landscape continues to undergo a bit of a shift with France's snap election being called by Macron. The right (far or otherwise) is certainly gaining some traction across Europe. Following Fridays decline on the FTSE100 from the 8300 level the momentum remains with the bears and the daily EMAs have crossed over to bearish this morning, with the 8250 level locking in as key resistance now.
We are dropping as I write this and the next daily support of 8166 is close - the bulls will need to defend this otherwise 8148 S2 is next up, and then 8080 S3. 8127 is the bottom of the 10d Raff though which could see a reaction, though if the sentiment is negative it may well power through this too.
Resistance wise, then ideally we get up towards the daily pivot which is also at the 8250 level, along with the 30m 200ema. This level may well be a tough nut to crack, especially today given the negative overtones though. Above this then 8296 is the key fib, just above R1 at 8283. Feels like that is a big ask for today and we may well struggle to get a bull Monday today.
Light on the news front today thought ahead of the UK jobs news data tomorrow. Traders will still be pinning their hope on some rate cuts later this year, possibly August. If we follow Friday's NFP then a lot more jobs may have been created - and of course we are getting into the uptick for seasonal jobs.
Generally today I am thinking that we will see an attempt to get to the 8250 area at the least, but it's going to be up to the bulls to be quick out the blocks.
Good luck today.
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