For the past five weeks, there has been a tight movement in the FTSE trade as evidenced by a couple hundred points. It would seem that the days of 100 plus points gains and losses are now ending. The question is what would it take to breach from the stagnant 5,700-5,900 range?
Direction from across the pond
The third quarter earnings season is just getting ready, but we’ve already seen combined outcomes although with just a few consequences for the UK markets. Several firms were saddened by slower demand and with the large number of resource stocks in Britain; this might have been anticipated to the decline of the FTSE.
The presidential election campaign is now in its final week, but there has been very few impacts upon US equity markets amidst further afield. Polls suggest that it is looking very optimistic for the incumbent president therefore the only realistic outlook of the circumstance is instigating a FTSE breakout if there were late surge by the republican candidate.
Direction from the Eurozone
A Spanish bailout has been circulating like wildfire with an increased frequency but has not yet realised its planned outcome. Nonetheless, markets have been relatively more relaxed so any positive news would be improbable to initiate an increased buying frenzy, piling back into stocks with investors thinking things are turning in their favour. Prospects are also seeing a Spanish downgrade could somehow distort markets but the reality is clear that sovereign deficit is still slightly above the junk grade which indicates that the rating agencies will continue to have strong self-assurance. However if this comes with the caution then a bailout income is very necessary. Any blocking move given by the International Monetary Fund’s support for several more bailouts, the reaction could shift very swiftly.
Crisis in the Orient
Economic expansion in China is turning quite sluggish which is considered to be of little shock given the rampant rates of growth as evidenced over the recent fiscal years.
Beijing however has persistently intervened with rounds of policy easing frequently creating creative routes to keep the wheels of the industry continuously moving. Every time this news is circulated a consequent upside for London can be observed with the bulk resource plays tending to search for an assured support. Should Beijing decide not to move or threatens to further reign in their easing this would ultimately mean steering the FTSE out of its coverage with a probable robust selling outcome.
The question therefore will FTSE simply rely on this range for the time being? Presuming that there won’t be any mitigating circumstance lingering around then this is certainly expected. A principal factor is simply pointing to significant price reactions that would result from a significant degree of political interference in the future.