International Inventory Market Rally Could also be Quick-Lived

FTSE 100 value, information and evaluation

  • A number of elements are lifting inventory markets close to time period, together with hopes that an settlement on the US debt ceiling is shut, Putin’s supply to stabilize the world power markets and a possible assembly of Xi and Biden.
  • Nonetheless, worries about China persist, and this rally may replicate some short-covering and dip-buying earlier than inventory markets head decrease once more.

FTSE 100 rally could not final lengthy

World inventory markets, together with London’s, are benefiting from a extra useful information move. First up, US Democrats have signaled that they will take up Senate Republican chief Mitch McConnell’s supply to increase the US debt ceiling, decreasing the admittedly extremely unlikely threat of a US default on its money owed.

Second, Russian President Vladimir Putin has provided to stabilize international power markets, hinting that the State-backed Gazprom might improve provides to assist Europe. Third, US President Joe Biden and Chinese language President Xi Jinping have reportedly agreed to carry a digital summit that might scale back the tensions between the 2 international locations. And fourth, the European Central Financial institution is reported to be contemplating a brand new bond-buying program to stabilize markets after its pandemic emergency buy program (PEPP) ends in March.

That has all mixed to weaken the oil and natural gas markets however strengthened international inventory market indexes, together with London’s FTSE 100.

FTSE 100 Worth Chart, One-Hour Timeframe (September 30 – October 7, 2021)

Latest FTSE 100 price chart.

Supply: IG (You’ll be able to click on on it for a bigger picture)

Market worries persist

Notice, although, that the small advance that started mid-Wednesday might simply reverse. China’s troubled energy and property sectors stay a background concern, and the most recent rally may symbolize some dip-buying and short-covering that may quickly be over.

Friday’s US labor-market report is one other potential hurdle. Economists polled by the information companies count on non-farm payrolls to have risen by a hefty 500,000 in September, up from 235,000, and determine might immediate the Federal Reserve to taper financial stimulus as early as subsequent month… a transfer that will seemingly harm market confidence.

Bearish FTSE sign from sentiment information

As for retail dealer positioning, IG shopper sentiment information present 69.10% of merchants are net-long the FTSE 100, with the ratio of merchants lengthy to quick at 2.24 to 1. The variety of merchants net-long is 12.58% larger than yesterday and 13.64% larger than final week, whereas the variety of merchants net-short is 14.30% decrease than yesterday and 27.11% decrease than final week.

Right here at DailyFX, we usually take a contrarian view to crowd sentiment, and the very fact merchants are net-long suggests FTSE 100 costs could weaken. Merchants are additional net-long than yesterday and final week, and the mix of present sentiment and up to date adjustments provides us a stronger FTSE 100-bearish contrarian buying and selling bias.

— Written by Martin Essex, Analyst

Be happy to contact me on Twitter @MartinSEssex

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