Futures outlook: FTSE 100, DAX and S&P 500 all drop back

​FTSE 100 retreats from highs

The index has fallen back below 7600, having almost recovered all the losses since the February peak near 7700.

It had remained hitherto protected from some of the turmoil hitting other equity markets thanks to strength in its oil and mining stocks. Higher yields will provide some support to the banking sector, but the index is unlikely to remain immune forever from a broader risk off environment.

In a potentially negative development, the index has fallen below trendline support from the March low, but given the steepness of the rebound this needs to be treated with caution. Other indices, having fallen more sharply than the FTSE 100, may well start to find some support in the short-term, and this could help support this index as well.

Additional declines would target the 50-day simple moving average (SMA) at 7442, with a much deeper retracement bringing the 7220 level into view.

A recovery would put 7680 and 7700 into view, and then the 7730 highs from July 2019.

DAX still under pressure

Fears about inflation and the European Central Bank (ECB)’s response to it continue to pressure the DAX 40, which has continued its retreat from the 50-day SMA.

Last week’s declines have continued apace in the new week, with the index slipping below 14,000 in early trading. A catalogue of worries around rising inflation, tightening central bank policy and now also the French election have meant that the index has been unable to rediscover the bullish momentum that had prevailed since the low in March.

Nonetheless, for the time being this movement back from the late March peak still looks like a retracement rather than the beginning of a much bigger move to the downside. As yet, however the price has yet to provide any sign that a sustainable bounce is in sight.

This would require a move back above 14,200 from current levels, in order to recoup the losses of today and Monday. This would then put the late March peak at 14,840 back into view.

S&P 500 falls below 50-day MA

Rising yields have put pressure on tech stocks, and the losses of the past two weeks have accelerated thanks to the heavy weighting in the index towards these names.

Today’s US consumer price inflation (CPI) reading may also put further pressure on the index, which has already opened below the 50-day SMA for the first time since mid-March.

As with the DAX, the index has yet to show any sign that the price is about to bounce. For a more bullish view to emerge the price will need to push on above 4470, accompanied by a bullish crossover in stochastics. This would then put the 4630 high from late March back into view.

Continued declines risk a fall back in the direction of the lows from the first half of March, towards 4130.