GLOBAL equities continued to tumble last week with many indices crashing through technical support areas. At the start of the week, the FTSE gapped below its 50-day moving average around 5,350 and went on to trade below 5,100 briefly on Friday. This level is not only psychologically significant, but also important in technical terms.
It marks the 38.2 per cent Fibonacci retracement of the March 2009 – May 2011 rally, and the 50 per cent retracement of the financial crisis sell-off from October 2007 to March 2009. Traders will be watching the FTSE’s behaviour closely around this level over the coming weeks.
It has been a difficult time for stock market bulls and many are choosing to stand aside for now. The alternative is to attempt to “catch a falling knife” although for many the memories of the crash in 2008 remain fresh. Despite this, some investors are still hoping for an end-of-year rally. But the ongoing debt crisis across Europe continues to weigh on sentiment.
GFT quotes two-way prices on stock indices around the clock, even when the underlying markets are closed. The FTSE 100 index is called to open down 40 points at 5125. The German DAX is expected to open down 58 points at 5435, and the French CAC 40 is forecast to open down 25 points at 2832.
On top of the problems in Europe, investors were also unnerved by Wednesday’s surprisingly weak Chinese Manufacturing PMI. There is an update for this number on Thursday, with bullish investors hoping for an upward revision.
Today sees the release of New Home Sales from the US, with additional housing data out tomorrow when the S&P/Case Shiller House Price Index is published, closely followed by the Conference Board Consumer Confidence Index.
Wednesday sees another round of meetings between European finance ministers together with an update on Eurozone inflation. On Thursday, members of the Bank’s MPC testify to the Treasury Committee on inflation and the economic outlook. We’ll also see the latest UK Manufacturing PMI.
Rounding off the week is Friday’s US Non-Farm Payroll number. Job creation fell to just 80,000 last month, well below the 125,000 threshold required to absorb fresh entrants into the labour market.
Martin Slaney is director of global product management at GFT