FTSE to 7075 on rising geopolitical risks?

FTSE is moving lower in early trade as concerns over the protests in Hong Kong fuel risk off sentiment.

The FTSE, along with its global peers, is moving lower in early trade as concerns over the protests in Hong Kong fuel risk off sentiment.

Hong Kong is proving to be a headache for China. What started out as a protest against a bill that would have permitted extradition to China, is morphing into a democracy movement. The overriding fear for the markets is how China will respond. Not only is Hong Kong very visible to Europe, it is also a key financial hub in Asia. It wouldn’t be surprising if China send in the People’s Liberation Army to quash the uprising, but this could have global implications. Whilst the airport has re-opened, anti-government protestors have returned there today. 

Developments in the financial hub of Hong Kong are adding to an already tense geopolitical picture amid ongoing US – Sino trade tensions. Investors are once again pulling out of riskier assets such as equities whilst flows into safer havens are on the rise. Furthermore, blue chip stocks with dealings in Hong Kong, such as HSBC and Standard Chartered remain under pressure as protests move into the 10th week.

Pound traders shrug off impress wage growth data
The pound and its impact on the FTSE was in focus following mixed UK labour data. Unemployment unexpectedly rose to 3.9% whilst wage growth jumped to an 11 year high of 3.9%. Under normal circumstances this level of wage growth would send the pound soaring, given that it creates inflationary pressures. However, higher unemployment has hit a nerve given that the UK economy contracted in Q2 and is starring down the barrel at a no deal Brexit. Wage growth data is proving to be too much of a lagging indicator for pound traders to take to much notice of. As the pound picked up from session lows, the stronger currency dragged the FTSE lower. That said, the pound remains in negative territory.

UK inflation data tomorrow is expected to show a decline to 1.9% yoy. A weak reading could pull the pound lower which could offer some support to the FTSE.  However, should the geopolitical picture deteriorate further, the FTSE could take a step lower.

FTSE levels to watch:
The FTSE continues to consolidate following the steep sell off at the beginning of the month. The FTSE trades below its 50, 100 and 200 sma on the 4 hour chart, indicating a strong bearish trend is still intact. A breakthrough support at 7250 could open the doors to a deeper decline to 7075. On the upside a breakout above 7255 could see the FTSE attack resistance at 7305 before targeting 7400.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account