Edgy FTSE loiters near 2014 low

<p>FTSE was ‘on the edge’ for most of the session. Almost literally. Whilst the UK’s benchmark stock index only managed a range of 0.64%, it […]</p>

FTSE was ‘on the edge’ for most of the session.

Almost literally.

Whilst the UK’s benchmark stock index only managed a range of 0.64%, it closed at 6482.24, near its weakest levels of the year, having marked a low for 2014 at 6416.72 in February.

Sentiment on the UK’s 100 biggest capitalised stocks started to sour on Monday, after factory gate data from Europe’s largest economy, Germany, showed a 5.7% fall in August, after a 4.9% climb in July.

A reading of industrial output from the same region a day later was further confirmation that the area thought to have weathered the wider European slowdown better than its neighbours, was starting to struggle.

The International Monetary Fund’s (IMF) downgrade of its global growth forecasts, including Germany’s were a moot point, by the time they were announced later on Tuesday.

All major stock markets suffered on the economic news, but the UK’s benchmark index had already been trading relatively weakly versus its German counterpart, the DAX30 benchmark index, before this week.

FTSE 100 is up just 0.7% over the last 52 weeks, Germany’s DAX30 benchmark index is up 5.1%.

British investors probably have in mind the double-edged sword of the UK’s relatively robust economic come-back compared to Europe. The problem with it is that the Bank of England has signalled it could raise rates and end its asset-purchase programme in the wake of the UK’s improving economic picture, spooking investors.

 

Spectre of Ebola as Fed minutes reveal growth worries

The first case of Ebola infection in the US, which emerged this week, also seemed to perturb global markets.

Whilst the case was highly contained, markets can’t seem to shake off the horrific spectre of a wider contagion in the West, no matter how improbable such an eventuality might be.

The death of the US Ebola victim, Thomas Eric Duncan, reported on Wednesday afternoon, could potentially unsettle markets further.

Add the US dollar continuing to drift upwards today, with the implied hampering effect on US company earnings, right on time (at least for sentiment) at the start of the third-quarter earnings season.

Finally, the Federal Reserve’s minutes from its most recent Federal Open Market Committee policy-meeting released a short time ago showed that a few Fed officials “noted that economic growth over the medium term might be slower than they expected if foreign economic growth came in weaker than anticipated”.

 

Markets were on the lookout for any indications by Fed members on the timing of a potential rate hike next year. If such a signal had been present in the discussions, the dollar would probably have advanced further.

However, the emphasis of the minutes on growth concerns and the lack of a discernible hint on policy timing have softened the dollar across the board, this evening

Intercontinental Exchange’s ICE US Dollar Futures contracts have slipped into the red, having been trading higher before the release of the Fed minutes.

 

FTSE Future ticks up on Fed minutes

As for the FTSE 100, the most relevant futures market referencing the UK benchmark is the LIFFE (London International Financial Futures Exchange) FTSE Index.

The current ‘front-month’ (most traded) contract is set to expire on 19th December.

Its hourly chart shows the contract breaking back above 50 and 100-day moving averages this evening, having been becalmed beneath those levels earlier on Tuesday.

I’ve added a line where the relevant FTSE futures contract at the time bounced hard on 8th August 2014.

If the current futures rally doesn’t take the contract out of the downtrend channel, the pivot line could serve as support (and resistance if the contract falls back underneath the line.)

FTSE Dec4 FUTURES

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