FTSE 100 forecast: European stocks rise as investors shrug off tariff threats

European equities extended their recent rally, with the DAX leading the charge to rise 1% and hit a new record high.  Gains were coming largely from defence stocks amid recent government pledges to ramp up military expenditure. Meanwhile in London, the likes of BP and Shell rallied more than 1% each as oil prices remained on the front-foot. Overall, sentiment was buoyed by ongoing investor optimism around a potential trade accord between Brussels and Washington. The FTSE 100 forecast remains supported on these macro developments as the UK index also edged closer to a new record. Can it get there, and will the gains hold, are the key questions now given the unpredictable nature of Trump and his ability to move markets with a few words.

 

EU-US trade agreement close?

 

President Trump yesterday hinted that the EU would soon be informed of the export tariff rates it can expect in the event it fails to reach a deal. But he noted that negotiations were “going well,” and according to the Financial Times, EU officials are reportedly closing in on a deal with their American counterparts. Market sentiment appears relatively unfazed by trade tensions for now, with a general sense that the US president may yet favour flexibility over confrontation.

 

Nonetheless, it’s not all plain sailing. Trump also announced a sweeping 50% tariff on imported copper and flagged the possibility of levies on semiconductors and pharmaceuticals. Fourteen countries have already been notified of the new measures, set to come into force on 1 August. Still, the door to further negotiations remains ajar, and Trump is expected to announce tariff plans for another seven nations later today.

 

FTSE 100 forecast remains supported amid broad positive risk tone

 

Global risk appetite has remained strong ever since Trump’s surprise extension to reciprocal tariffs after he caused a major sell-off in risk assets in April. That bullish momentum paused temporarily in the wake of the Israel-Iran conflict, before the sudden ceasefire lifted equity markets around the world to new multi-year or in some cases record highs. That said, though, the FTSE 100 continues to lag, at least for now.

 

As well as reduced tariff concerns, optimism is growing that the Federal Reserve could begin cutting interest rates as early as September, particularly if upcoming data shows inflation is softening. But this is not a given as Trump’s policies could ramp up inflation in the coming months, which would lessen the need to loosen policy aggressively.

 

Technical FTSE 100 forecast and key levels

 

 

Although trading softer flattish today, the FTSE 100 remains within a broader bullish trend. As global benchmarks continue to show strength, the UK index could soon follow suit—particularly if oil prices stabilize further.

 

Currently, the FTSE appears to have just come out of prior consolidation phase – a bullish continuation structure. The breakout means the index is now potentially on the verge of a new wave of technical buying, once there is some more clarity on the tariff front.

 

Key Resistance Levels:

 

• Initial resistance is seen around the March all-time high at 8,910.
• Beyond that, the psychological 9,000 level becomes a potential target

 

Key Support Levels:

 

• The 8,762 to 8,830 area represents a critical support zone (highlighted by the blue-shaded area on the chart). This area was formerly resistance until we climbed out of it yesterday.
• 8600/15 area is the next major support zone in the event index breaks above support area.

 

If support within this zone fails to hold, it may signal the start of a deeper correction. However, for now, the broader technical FTSE 100 forecast remains bullish.

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R