FTSE skyrockets to new heights, outperforming global indices with impressive weekly gain

[MongiIG]

The FTSE 100 eclipses its all-time high with a 3.1% gain amid UK growth optimism and inflation ease, while the DAX ends its losing streak with a 2.30% rise, ahead of crucial Eurozone data.

 

Source: Getty

 

Indices Inflation Recession Interest rate European Central Bank Eurozone

Written by: Tony Sycamore | Market Analyst, Australia

 

Publication date: Tuesday 30 April 2024 06:19

The FTSE made a significant move last week, surging above its all-time 8047 high, and locking in a healthy 3.1% gain for the week. At the same time, the DAX snapped its three-week losing streak to finish the week 2.30% higher.

The trigger for the FTSE's burst higher last week was additional signs that the UK growth profile is improving. This is a key factor to watch, as it could potentially influence the FTSE's performance in the coming weeks. Last week's flash PMI came in at 54, beating the 53 expected. At the same time, a softening inflation profile is opening the door for the Bank of England (BoE) to cut interest rate. Finally, after trading sideways for the better part of fourteen months, its valuations are attractive compared to its offshore counterparts.

While the German stock market doesn't screen as particularly cheap, it has benefited from improving growth and inflation profiles. Both factors will be scrutinised tonight when Q1 GDP and inflation data for April are released.

What is expected from EZ Q1 2024 GDP?

Date: Tuesday, 30 April 7pm AEST

In the last quarter of 2023 (Q4), the Eurozone unexpectedly avoided recession as firmer growth in Italy and Spain offset contraction in Germany, resulting in a growth rate of 0% following a 0.1% contraction in the third quarter.

Anaemic growth in the Eurozone during the second half of 2023 was due to elevated interest rates, high inflation, a slowing global economy and heightened geopolitical tensions. In recent months, the European Central Bank (ECB) has acknowledged that inflation is on the right path to converge on its target and has signalled that it is expecting to ease monetary policy as early as June.

The market anticipates imminent ECB interest rate cuts, which, coupled with a resilient global economy, has significantly improved the outlook of business surveys and PMIs in the Eurozone. This improvement will likely be reflected in tonight's GDP release, with the market forecasting a rise of 0.2% QoQ.

Euro area GDP annual growth rate chart

 

Source: TradingEconomics

Inflation outlook

Date: Tuesday, 30 April at 7pm AEST

In March, headline CPI fell to 2.4% YoY in March from 2.6% in February. The Core rate cooled to 2.9%, its lowest rate since February 2022. This month (April), the consensus is for headline inflation to fall to 2.4% YoY in April, with core dropping to 2.6% from 2.9% prior.

DAX technical analysis

In our last update, we noted that a "short covering rally from here would not surprise", which would be viewed as the second wave (or Wave B) of a three-wave ABC correction from the 18,567 high.

This remains the case, with the rally from the 17,626 low viewed as Wave B, which should not exceed resistance in the 18,400/550 area and be followed by another leg lower (Wave C) towards the 17,500/300 support zone. We will be looking closely for signs of basing in this area to establish longs.

DAX daily chart

 

Source: TradingView

FTSE technical analysis

We have maintained a bullish stance in the FTSE since it broke above downtrend resistance in mid-March, coming from the February 2023, 8047 high. Last week, we noted that while "the FTSE holds above support at 7760ish, expect a break of the all-time high at 8047 before a push towards 8250."

Providing the FTSE remains above support at 8,000 we continue to look for a test of 8250, with scope to 8400. Aware that should the FTSE lose support at 8,000 on a sustained basis, it would warn that a deeper pullback is underway initially to 7800.

FTSE daily chart

 

Source: TradingView

• ^{Source Tradingview. The figures stated are as of 30 April 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}

 

 

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