FTSE 100 & DAX Break Crucial Support as Trade Wars and OPEC Inspire Losse
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- Trade War Optimistic Boost Quickly Faded
- FTSE 100 | Fresh 2018 Lows Opens Scope for Key Fibo
- DAX | Bearish Sequence Persists with Prices at 2YR Lows
Trade War Optimistic Boost Quickly Faded
The optimistic tone following the G20 summit in which both President Trump and Xi agreed to hold off on further tariff measures had been short-lived, following reports that Canada has arrested Huawei’s CFO at the request of US authorities. This had then prompted China’s Embassy for an immediate release, subsequently raising concerns on trade discussions. Elsewhere, German automaker CEO’s continue to highlight that auto tariff from the US remain on the table.
Crude oil prices renewed its sell-off with Brent breaking below $60/bbl as the Saudi Arabian Energy Minister stated that all options are on the table including a no-deal. Alongside this, Al-Falih highlighted that they would be prepared for a no-deal, subsequently raising the risk that OPEC may fail to reach an agreement to cut production. However, as is typically the case when OPEC meet, headline risk for oil is elevated. While there hasn’t been an agreement “yet”, the base case is for OPEC+ to reach an agreement to stabilize the energy complex.
FTSE 100 | Fresh 2018 Lows Opens Scope for Key Fibo
The FTSE 100 has taken a sizeable hit this morning amid the backdrop of plunging oil prices and renewed trade war concerns. Consequently, the FTSE 100 made a break below the 2018 low (6841) to prompt a move below 6800. Among the largest drags on the index is unsurprisingly the energy sector which in taken 40 points off the FTSE, while Chinese exposed firm HSBC shed 15points alone. The FTSE is now eyeing key support at the 6700 level, which also coincides with the 50% Fibonacci retracement, potentially offering some reprieve.
FTSE 100 Price Chart: Weekly Time Frame (Jan 2016 – Dec 2018)
DAX | Bearish Sequence Persists with Prices at 2YR Lows
The bearish sentiment shows no signs of easing as the DAX posts a fresh 2yr low. The threat of auto-tariffs and slowing global growths will continue to keep upside limited. Risks remain tilted to the downside, which in turn opens room for a test of support at 10800, while a longer-term target for bears is for a move towards 10500.
DAX Price Chart: Weekly Time-Frame (Nov 2015 – Dec 2018
--- Written by Justin McQueen, Market Analyst
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