Global Markets Braced for Brexit Chaos and Italian Showdown
Equity Analysis and News
- FTSE 100 | Brexit Uncertainty to Persist, Key Support Tested
- S&P 500 | 2700 Curbs Further Losses, Risk Barometer Points to Indecision
- FTSE MIB | Italian Budget Showdown Continues
For more information, check out Justin's weekly webinar where he discussed the impact of Brexit and Italy.
As of 1720GMT Nov 16th
FTSE 100 | Brexit Uncertainty to Persist, Key Support Tested
The political backdrop looks bleak for the UK as PM May struggles to bring her party together to support her Brexit plans. Unlike the Pound, this has not led to a large degree of strong selling in the FTSE 100. Partly because the sell-off in the Pound has eased the downside for the more internationally exposure FTSE 100. On the technical front, the 7000 level continues to provide firm support and curb the index of further selling. However, given the uncertainty over Brexit and with a leadership challenge potentially on the horizon, risks remain tilted to the downside. A break and close below 7000 can open a move towards 6950 with a larger move back towards the YTD low of 6840.
FTSE 100 Price Chart: Daily Time Frame (Nov 2017 – Nov 2018)
Dovish Fed Dents Rate Hike Expectations
A flurry of cautious statements from key Fed Official has caught many by surprise with both US yields and Dollar slipping. Fed’s Powell and Clarida had both highlighted that US may face headwinds next year with signs of a slowdown in global growth, while fiscal stimulus effects fade. Now, while this will unlikely impact the December rate hike. Further rate increases going forward have come under question with money markets pricing at rate hikes from the Fed.
S&P 500 | 2700 Curbs Further Losses, Risk Barometer Points to Indecision
Having mentioned last week, the 61.8% Fibonacci Retracement of the October drop had been rejected, thus prompting renewed selling in the index. However, support at 2700 and 2690 (marks the 23.6% Fibonacci Retracement) is holding. Alongside this, the risk on/risk off barometer is notably off the lows albeit lacking firm direction, implies a period of consolidation in the near term.
Source: Refinitiv: Spread between SPDR Industrial Sector Select Fund and SPDR Consumer Staples Sector Select Fund
S&P 500 Price Chart: Daily Time Frame (Nov 2017 – Nov 2018)
FTSE MIB | Italian Budget Showdown Continues
Last week saw Italy yet again defy the European Commission and stick to its big spending budget plan, keeping the deficit target at 2.4%. Consequently, the EU will now decide whether to begin measures to discipline Italy through possible fines. As such, sentiment for Italian assets remain negative with banks likely to underperform amid further uncertainty. Focus for bears is the 18400 level, which has previously been defended.
FTSE MIB: Daily Time Frame (Nov 16 – Nov 18)
--- Written by Justin McQueen, Market Analyst
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