Calm, kind of – Accendo Markets

Calm, kind of – Accendo Markets

Mike van Dulken, Head of Research at Accendo Markets commented to clients this morning:
FTSE 100 Index called to open -40pts at 7455 having adjusted by 41pts for ex-dividends. This extends the trend of falling highs from Tuesday’s 7550 peak. Whilst 7450 has held up as support overnight, Bulls are likely eyeing up August rising support at 7440 to engineer a bounce. Bears are looking for a breach of 7450 and then 7440 to trigger a full retrace to the 7375 floor of the July/August shallow rising channel. Bulls need a break above 7480 overnight highs to see 7500 again. Watch levels: Bullish 7480, Bearish 7450.
Calls for a negative open (flat after dividends) come following minor losses in Asia overnight where sentiment remains understandably hampered by geopolitical concerns towards North Korea, although the tone of rhetoric has at least cooled on the US side.
Most safe havens remain bid – Gold around 2-month highs – but this is not necessarily at the expense of all risk assets, with oil approaching is best levels for August following yesterday’s US inventory data (big crude drawdown), Copper flat around recent 2yr highs and iron ore off its lows.
FTSE housebuilders may be impacted by overnight RICS House Price data suggesting that declines are starting to spread beyond London as political uncertainty and tax changes weigh on the top end of the market.
Japan’s Nikkei is just the wrong side of break even as consumer staples and financials offset gains for Energy, and it’s a similar picture down under where Australia’s ASX is only losing a little ground due to declines for Consumer staples and healthcare, but higher oil and buoyancy among industrial metals is helping both Energy and Miners.
US markets closed lower, keeping the Dow Jones’ from its recent high, after heavy losses for Walt Disney and of course geopolitics on the other side of the world, while the Fed’s Evans suggested a December rate hike is a possibility.
In focus today will be UK Construction Output (9.30am) forecast to deliver a big rebound in June after a flat APril and May.Industrial and Manufacturing Production are also forecast to show improvements although growth remains muted to say the least.
This afternoon, with US inflation being closely monitored for clues about when the Fed might next hike interest rates, listen out for US Producer Price Inflation (1.30pm). The Headline rate is seen flat in July and a touch quicker for Core, however, annually things may have picked up for both.
The Fed’s Dudley (dovish) speaks mid-afternoon which could influence Fed rate hike expectations and thus USD, with a knock on for GBP and EUR, and FTSE and DAX respectively.

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