Open account
☰
Open account
✖

FTSE analysis: Time for UK to join global rally?

Article By: ,  Market Analyst
November 24, 2023 4:00 PM
  • FTSE analysis: Could the UK index start catching up with global indices?
  • Improving UK data could help UK markets
  • FTSE technical analysis

 

FTSE video analysis

 

The ongoing stock market rally continues. With the US Thanksgiving holiday keeping trading on the quieter side on Thursday, the European markets edged higher. The DAX has now completely made back the entire losses it suffered between September and October. Other mainland European indices have similarly made strong gains, along with Wall Street. But frustratingly for the UK market, the FTSE has not shown much desire to go higher. Will that change as we head towards the end of the month?

 

FTSE analysis: Could the UK index start catching up with global indices?

 

Global markets have been excited by the possibility of central banks adopting a more dovish stance moving forward, with signs of global inflationary pressures slowly moving to normal levels. In the UK, times are tough. Inflation has been very slow to move down and interest rates are going to remain high for a long time as a result. This prevented the FTSE to further expand its rally earlier this year when it hit a new all-time high in February. Since then, the FTSE has struggled to find any sustainable support, hurt by concerns over China, UK’s struggling economy and high interest rates across the world.

 

However, we have had some positive data out of China, the UK and US in the last couple of weeks, which may mean the worst days are behind us, especially as there is now diminished macro concerns compared to a few months ago.

 

Improving UK data could help UK markets

 

Last week saw UK inflation come in sharply lower to an annual pace of 4.6% from 6.7% previously. While the CPI-related optimism quickly faded, the downside has been limited with the FTSE clinging onto key support at around 7450. On Thursday, we learnt that the UK’s services sector unexpectedly rose back above the expansion threshold of 50.0 in November, according to surveyed purchasing managers in the industry. The services PMI came in at 50.5 vs. 49.5 expected and last. The manufacturing sector remained in contraction (46.7), albeit at a less worrying pace than the month before (44.8) and better than expected (45.0). The data helped to lift the pound across the board, but it didn’t have much impact on the FTSE, with the index falling in the first half of Thursday before recovering in the afternoon.

 

FTSE technical analysis

Source: TradinView.com

 

As mentioned, the FTSE has been unable to partake in the same upward momentum witnessed in other European and US stock markets over the past several weeks. The FTSE is lagging behind and needs to make up ground. However, in recent days, there has been a positive development as the FTSE has climbed back above the 21-day exponential moving average and overcome resistance at the 7450 level. This suggests a potential resurgence of bullish momentum in the UK markets. At moment, the 7450 level is continuing to hold as support having undergone several tests from above this week, indicating the possibility that bulls might intervene to drive the index higher as we enter the twilight stages of the week, and month.

 

Despite consistently forming lower highs throughout the year, the UK index has not experienced a significant sell-off. Instead, it has predominantly held within a broad consolidation range. Remarkably, the index has successfully maintained levels above the March low of 7202, even in the face of several bearish attempts to breach this threshold—twice during the summer and once in October. The impressive bullish resilience exhibited in the midst of various macro risks suggests that the index, having endured relatively minimal damage, might now be poised to rise on the back of positive developments. There is a good possibility that we might see a rally aiming to test the 200-day average and previous resistance in the 7600-7620 range in the near future. To start an ascend towards that level, short-term resistance at 7510 must be taken out first.

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    • Open an account in the UK
    • Open an account in Australia
    • Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024