FTSE 100, CAC 40 and S&P 500 likely to consolidate
Outlook on FTSE 100, CAC 40 and S&P 500 amid stubbornly high UK inflation and Q1 earning’s season.
FTSE 100 likely to consolidate after ten consecutive days of rises
The FTSE 100 continued its advance and reached a six-week high at 7,919 on Tuesday despite UK average hourly earnings rising by 5.9% in February instead of an expected 5.1%.
These pointed towards the possibility of another rate hike by the Bank of England (BoE). This view has been strengthened by Wednesday morning’s UK inflation data which came in stronger-than-expected with the headline consumer price index (CPI) at 10.4% year-on-year (YoY) in March versus an expected 9.8% and 10.1% in February.
Core-CPI YoY was seen at 6.2% (versus 6.0% expected), just as in February with monthly CPI rising to 0.8%.
In view of the stubbornly high inflation reading the FTSE 100 is likely to retrace lower, at least short-term, with a fall through Tuesday’s low at 7,881 putting the 7,876 to 7,854 January high and late February low back on the cards.
Were Tuesday’s high at 7,919 to be exceeded, the early March high at 7,976 and the psychological 8,000 mark would be next in line.
CAC 40 consolidates near all-time record high
The CAC 40 has risen to a new all-time record high on Tuesday, made slightly above the 7,550 mark whilst volatility is dropping off and upside momentum is diminishing.
The index may thus consolidate in the short-term within its bullish trend and is likely to revisit the psychological 7,500 mark once it slips through the March-to-April support line at 7,534.
While Monday’s low at 7,493 holds on a daily chart closing basis, however, the immediate uptrend remains valid with further upside likely to be seen.
A rise above 7,559 would engage the 7,600 region.
S&P 500 consolidates after reaching two-month high
The S&P 500 has been gradually advancing in a tight trading range since Q1 earnings season kicked off last Friday and came close to but didn’t quite reach its February peak at 4,195 which, together with Tuesday’s high at 4,172, is likely to cap, at least short-term.
Since negative divergence can be spotted on the daily Relative Strength Index (RSI) with it not confirming Tuesday’s peak, the 4,141 early April high is expected to be retested. Further minor support can be spotted in the 4,125 to 4,111 area, the highs seen between 7 and 11 April.
While last week’s low at 4,071 underpins on a daily chart closing basis, however, the medium-term uptrend remains intact.
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