FTSE100 slopes above the recent rangeUK100, Daily & H4
European stock markets are broadly higher. Eurozone markets, which rallied from the off led by Italy's MIB, have come off early highs, while the UK100 extended gains through the session and as of 10:34GMT was up 0.69%, while the GER30 was up 0.57% and the MIB up 0.78%. The broad move higher came after a strong session in Asia, where Chinese equity markets rallied again amid the verbal support from authorities and plans to cut personal income taxes to support the domestic economy as trade tensions start to have an impact helped to boost stock market sentiment. China's President Xi Jinping vowed "unwavering" support for the private sector, although it remains to be seen whether this is a lasting rebound in market sentiment. US futures are also up, while oil prices are down from early highs and at USD 69.20 per barrel.
In the UK, the focus will be on the fragile political scene, with Prime Minister May due to make an unusual appeared at 14:30 GMT, in an attempt to shore up support in the face of growing support among her Conservative party MPs for a no confidence vote. May is to say that she is 95% of the way towards securing a workable deal, as well as providing details. Whether this will be enough to save herself remains to be seen as her Brexit plan is deeply unpopular among significant portions of both Eurosceptic and Europhile members.
The Pound has declined by average of nearly 1.5% versus the Dollar, Euro and Yen over the last week, which reflects an increased Brexit-risk discount after the October-17 Brussels summit, which had only recently been trumpeted as a make-or-break threshold, came and went without any sign of a breakthrough on the seemingly insoluble Irish border problem, and with the EU cancelling a formerly pencilled-in special Brexit summit for mid November due to the lack of progress. Now the Prime Minister is facing an existential threat, with the Conservative party's 1922 Committee, formed of backbench members of parliament, needing only two more letters from party MPs to trigger a no confidence vote. This would pave the way to a leadership challenge, which would hurl a spanner in the works of the time-running-out Brexit negotiation timetable.
Along with Pound discount, we have seen so far UK100 moving higher, crossing earlier above the range 6922 - 7095 in which was stuck for the past 7 days. A closing today above this barrier, could suggest that in the near term the index is ready to recover a bit from the sharp drop in October. This is based on the positive bias presented as the UK100 is off its lows moving above 23.6% Fib. level set from 7557 high and by forming higher lows since October 11.
However in longterm, such move higher cannot confirm the turn of the overall negative outlook into a positive one, but could oppositely alert a possible selling opportunity. This is based on the decline seen for UK100 since May, with the index looking unable to recover since then, by forming lower highs. Hence any rebound could just show a short-term recovery for this long-term decline, and therefore another opportunity for a possible sell-off.
Meanwhile, daily momentum indicators support the increase of negative momentum, while intraday indicators are sloping northwards stating the rise of positive momentum in the near-term.
To sum up, a close today above 7095, could trigger the attention towards 7220-7260 area. The latter coincides with August's lows, 20 day SMA and 50% Fib. level set from September's peak.Further gains could lead towards 7400-7450 Resistance area (i.e. between trendline connecting lower highs and 200-day SMA).
However a failure for index to sustain an upwards movement would suggest the return to 6922 Support level. Intraday Support levels are set at 7035 and 7000
Andria Pichidi
Market Analyst
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