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FTSE 100 Analysis: Eyes on Defensive Stocks as Trump Slams NATO

FTSE 100 Analysis: Eyes on Defensive Stocks as Trump Slams NATO

Justin McQueen, Analyst

FTSE 100 Analysis and News

  • FTSE 100 recovers as Q2 earnings optimism offsets trade war concerns
  • Eyes on defensive stocks as Trump demands NATO allies up defense spending

FTSE 100 Bounces Back

Much like the rest of European bourses, the FTSE 100 is bouncing back from yesterday’s losses, as concerns over a fresh round of US tariffs on China, mounting to $200bln worth of Chinese goods has been offset by the increased optimism heading into earning season.

Optimism over Q2 Earnings Supports Banking Names

On Friday, four of the biggest US banks will get the Q2 earnings season underway with Citigroup, JP Morgan, PNC Financial and Wells Fargo all due to report. Amid surging economic growth, alongside the tax overhaul, there has been increased optimism over potentially strong earnings from the large US banks, as such, UK bank have also been rising in tandem, which in turn has supported the bounce back in the FTSE 100, given that they hold the second largest weighting in the index. Overall analysts have been upgrading their earnings expectations for the FTSE 100 in recent weeks, subsequently brightening the outlook for the index.

Trump Demands NATO Allies up Defense Spending

Eyes are on defensive stocks after President Trump slammed NATO as only 5 out of 23 allies reached the 2% GDP spending target on defense, compared with the United States 4% spending. Alongside this, President Trump has demanded that defense spending target upped to 4% of GDP. In the wake of these reports, BAE Systems and Rolls Royce are notably firm and have provided a lift for the FTSE 100.

FTSE 100 Technical Levels

Trend signals suggest risks are skewed to the upside for the FTSE 100 with momentum and RSI indicators moving higher. Minor resistance around the 23.6% Fibonacci retracement of the 2018 low to the 2018 peak at 7652 capping further gains for now. A break above combined with a run of strong UK earnings reports could see the index make a run in for fresh record highs. Support at 7497 marks the 38.2% Fib level, which also coincides with the 100DMA.

For another view on the FTSE 100, clickhere

FTSE 100 PRICE CHART: DAILY TIME FRAME (February 2018-July 2018)

FTSE 100 Analysis: Eyes on Defensive Stocks as Trump Slams NATO

Chart by IG

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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