FTSE outlook positive despite weaker start

FTSE outlook: China’s export jump is a positive sign for demand
Rising commodity prices should support mining stocks
FTSE technical outlook point higher

The FTSE was unable to build on its two-day gains this morning, as it traded lower in a mixed session for global stock markets. The UK index was held back by 4 stocks going ex-div (HSBC, Standard Chartered, Rio Tinto and Berkeley Group) which took away around 30 points, while shares in Melrose plunged 5%, as issues across its supply chain held back growth. Apart from these stocks, there was no other major issues. So, effectively, there are no macro reasons behind today’s weakness, which may mean the FTSE will be able to regain its poise and head higher later, given the underlying bullish trend and an overall positive environment for global equities.

FTSE outlook: China’s export jump is a positive sign for demand

After gold hit a record high, today saw coper prices display bullish signs, tracking the recent positive signs in Chinese equities. After underperforming global indices for several months, China’s markets have been rising lately. If the gains are to be sustained, this could help provide support for the UK’s struggling FTSE 100, which, too, has been left behind the tech-fuelled global stock market rally this year.

Commodities, and commodity-linked stocks could find support from signs of a recovery in China.

The world’s second largest economy saw its exports jump at the start of the year by 7.1% in US dollar terms in the January-February period from a year earlier. This was well above forecasts and significantly higher than December’s gain. Imports grew 3.5% during the same period. The trade surplus reached a record $125 billion, as a result.

The rise in Chinese exports suggest global demand is recovering for goods from the world’s second-largest economy. If sustained, this should be good news for European and Chinese stocks.

Meanwhile, China has set an ambitious annual growth target of approximately 5%, placing pressure on the country's top leaders to implement additional stimulus measures to achieve this target. Investors are hopeful that that the ambitious target will help bolster confidence in an economy hindered by a downturn in the property market and persistent deflationary pressures.

FTSE outlook: Technical levels to watch

As commodities rise and China's markets begin to show signs of improvement, there is optimism that the resource-heavy FTSE 100 index could soon catch up to the global stock market rally after lagging behind its US and European counterparts in recent months. However, the index must demonstrate a strong bullish signal indicating readiness for an upward surge.

Source: TradingVIew.com

Despite attempts over several months, it has failed to sustain a breakout above the high of 2022 around the 7687/8 mark. Therefore, a decisive move above this level is essential before we can expect a more sustainable breakout this time.

Nevertheless, the underlying trend remains bullish, supported by the formation of higher lows over recent months and the index trading above its 200-day moving average. In the short term, it is crucial for support to hold within the 7550-7600 range to maintain investor confidence and keep the bullish momentum intact.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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