FTSE 100 could slip as US job data points to deepening recession
The FTSE 100 has performed well this week, breaking above 6000 points. But the road to recovery is uncertain, with US job data pointing to a deepening recession and efforts to offset the economic impact of Covid-19 are failing.
The FTSE 100 index has performed well this week, breaking above 6000 points. But the road to recovery remains uncertain, with US job data pointing to a deepening recession and efforts to offset the economic impact of Covid-19 are failing.
US employment growth slowed in July as a result of a resurgence of coronavirus cases key states, with a little under 1.8 million new jobs to nonfarm payrolls, helping unemployment to fall to 10.2%.
US job data was better than many Wall Street analysts had forecast, which is good news, but not great. Ultimately, the data shows that US jobs recovery is still shaky and American politicians will have to work fast to negotiate and approve another aid package to support the economy.
S&P 500 keeps climbing despite US job growth slowing
The S&P 500 has not looked back since it found support last week at 3200, moving smoothly higher over the past week, in sharp contrast to the lack of progress in the FTSE 100 and the DAX, according to Josh Mahony, senior market analyst at IG.
‘Further gains seem likely as the index begins to recover overnight losses, with the sequence of higher highs and higher lows firmly intact,’ he added.
FTSE 100 recovery closely tied to health of US economy
The recovery of British blue-chips remains closely tied to the health of the US economy, with the FTSE 100 reflecting the level of uncertainty among investors as the index steady rally from March lows looks increasingly unsteady.
Since early June, where the FTSE 100 was trading at 6472 points, it has been trending lower, with the index falling 6% over the period.
The FTSE 100 closed at 6032.18 on Friday, climbing 2.1% over the last five days. However, the blue-chip index traded sideways in the final trading session of the week and the FTSE 100 futures market is marginally lower, suggesting that the stock could open lower next week and in weekend markets available with IG.
FTSE 100 faces confluence of trendlines
The FTSE 100 faces a choice between two trendlines, short-term resistance from Wednesday’s highs and a slightly longer-term support line from last Friday’s low, according to Chris Beauchamp, chief market analyst at IG.
‘A breakout above 6050 would signal that a new attempt to push higher is underway, while by contrast a drop below 5970 would clear trendline support and the low of Thursday’s session, and open the path to 5870 once again,’ he added.
How to trade the FTSE 100 this weekend
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Whether you want to go long (buy) or short (sell) the FTSE 100 based on the above outlook, you don’t have to wait until the markets reopen on Monday to trade.
The weekend prices for indices and forex are quoted separately to their weekday counterparts, based on our view of the prospects for that market given client business and news flow. As a result, you can use these markets to hedge against risk on your weekday positions.
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