FTSE bounds cautiously higher despite soft session in Asia

The FTSE is seen starting the new week on the front foot, despite a sharply lower end to the week on Wall Street and despite a softer session in Asia. The Dow ended so me 700 points lower, whilst Asian stocks took a beating, as trade ward fears continue to be a central theme to trading global shares.

The fresh consecutive record highs of the turn of the year are now a distant memory for traders, who have battled against an extremely challenging month, which saw the FTSE experience its biggest fall since 2015, whilst the US stock market had its worst week last week in 2 years.

China’s measured response

Last week global stock markets fell sharply as investors responded to Trump’s announcement of a further tariff on $50 billion worth of Chinese imports, in addition to the 25% steel tariff and 10% aluminium tariff announced. However, China’s response has been notably measured in response. China it in no mood to start a trade war and believes that I t can prevent the tension from escalating, by working to reduce the $375 billion trade deficit that the US holds and by opening access to its market, allowing Trump to call victory before the midterm elections.

Sentiment lifts but no fundamental change expected

This measured attitude has gone some way to adjusting risk profiles this morning. Slowly risk is being put back on the table on Monday, with European bourses edging cautiously higher and gold selling off some $4 after rallying $40 through the course of the previous week. 

Traditional safe haven USD/JPY was also taking a step higher after hitting 16 month low at the end of last week. However, this is unlikely to be a reversing point in the current selloff. Sentiment has clearly changed from January’s euphoria and given the heavy sell off seen, any change of sentiment is expected to be a slow grind.

FTSE to 7025?

The FTSE is currently trading at 6930 as it continues its rebound from Friday’s low. Previous support levels have now become points of resistance. 

A breakthrough at 6979 could encourage the index to continue to 7025 before targeting 7060. On the downside support can be seen in the region of 6640, however this is still some heavy selling away.

With little in the way of economic releases investors are expected to remain firmly fixated by the Trump tariff story. 

Later in the holiday shorted week we will see a splattering of high impact economic data in the form of US PCE and UK consumer sentiment.