ontinue to experience big intra-day swings in equity markets. Last week, the FTSE 100 broke above resistance at 5,600 (the 61.8 per cent Fibonacci Retracement of this year’s May-to-August sell-off) on three separate occasions. It went on to briefly test resistance at its 200-day moving average around 5,630 although it fell back sharply from here.
While this was indicative of continued improvement in investor sentiment, the bulls will be concerned that the FTSE failed to close above 5,600 at all last week. Even more troubling was Thursday’s sell-off which followed the ECB press conference.
While the 25 basis point ECB rate cut was greeted positively, as was the news of a sharp drop in US weekly jobless claims, traders rushed to reduce their long-side exposure to stocks as ECB President Mario Draghi began to speak. He revealed that the decision to cut rates was not unanimous which suggested that further easing was not a done deal. On top of that, he made it clear that the ECB would not step up its purchases of Eurozone sovereign debt, although it stood ready to provide liquidity to European banks.
The FTSE 100 index is called to open up 34 points at 5,563. The German DAX is expected to open up 44 points at 6,030 and the French CAC 40 is forecast to open up 8 points at 3,180.
The latest “make or break” EU summit was another damp squib, although the move towards full fiscal integration has raised hopes that the ECB will change its mind over becoming “lender of last resort.”
On the economic data front, we have UK inflation data tomorrow in the shape of the CPI and RPI.
Then we’ll see the German ZEW Economic Sentiment index, US Retail Sales and the FOMC statement. Thursday brings the latest update on Chinese manufacturing which has been unexpectedly weak of late. We’ll also see UK Retail Sales and US PPI, Capacity Utilisation and the Philly Fed manufacturing index. Friday brings US CPI.
Martin Slaney is director of Global Dealing Operations at GFT