UK FTSE 100 (.FTSE) falls and gold hits seven-year high as Iran fears grow
Mounting anxiety over the fallout from the US assassination of Iran’s general Qasem Soleimani pushed the UK stock market 1% lower with oil and gold making further advances.
The FTSE 100 shed 74 points to 7,548, reversing Friday’s oil-led bounce, with oil giants BP (BP) and Royal Dutch Shell (RDSA) up 1.7% and 1.1% respectively at seven-week highs, two of just four risers on the blue-chip index as Brent crude rose nearly 1% to $69.57 a barrel.
Gold rose 1.4% to $1,576 an ounce close to a seven-year high, reflecting the geopolitical and economic uncertainties if Iran or its allies responds and risks an escalation of the conflict.
This helped lift precious metal miner Polymetal International (POLY) 1.2% with defence group BAE Systems (BAE) up 1.1%, the FTSE’s only other gainer.
Normally defensive sectors such as consumer staples, healthcare and telecoms fell alongside technology, industrial and financial stocks, which AJ Bell analyst Russ Mould said was unusual.
‘In times of strife you would normally expect to see people flock to defensive sectors like utilities and healthcare,’ he said. ‘In reality, the only so-called safe haven seeing price appreciation is gold, which has now increased by nearly 8% over the past 30 days.’
Mid-cap stocks let go some of their recent gains with the FTSE 250 down 261 points or 1.2% at 21,727.
The FTSE Small Cap was more resilient, off 14 points or 0.2% at 5,952 though Lindsell Train (LTI) and Biotech Growth (BIOG) investment trusts were big fallers, down 4.3% and 2.6%.
Markets.com analyst Neil Wilson said nervous investors were seeking ‘shelter from the risks of Gulf War III’.
‘The killing has lit a fire under oil and gold as US-Iran tensions necessitate a higher geopolitical risk premium,’ he said.
However, he said Brent would need to rise above $73 to be a problem.
‘Fundamentally, oil markets are just not as exposed to oil price shocks as they were in days gone by,’ he said.
‘US shale and a host of production sources coming onstream mean the threat to global supplies from a Middle East conflict is, though significant, not gargantuan.’
George Lagarias, chief economist at accountants Mazars, agreed that with the price of crude still below last April’s levels, they were unlikely to affect central banks’ assessment of inflation and interest rates, which were the key driver of asset prices.
‘Exciting as this story may be, it will probably have little effect on risk assets, unless things escalate dramatically,’ he said.
Nevertheless, Connor Campbell, analyst at Spreadex, said the outlook was fraught. Joint operations against ISIS have already been put on hold, and Iraqi MPs have passed a resolution calling for US troops to leave their country.
This has prompted Trump to threaten sanctions against the country and hit 52 sites in Iran ‘very hard’ and disproportionately if it retaliates.
‘Whether it escalates into large-scale attacks over the coming days and weeks, and grows into a full-blown US-Iran conflict, is very hard to say. But the risk premium genie is out of the bottle again,’ said Wilson.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 7,437.68.
The projected upper bound is: 7,738.20.
The projected lower bound is: 7,425.06.
The projected closing price is: 7,581.63.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 54.6413. This is not an overbought or oversold reading. The last signal was a sell 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 59.80. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 22. This is not a topping or bottoming area. The last signal was a sell 6 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
FTSE 100 INDEX closed down -47.060 at 7,575.340. Volume was 29% below average (neutral) and Bollinger Bands were 100% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 7,598.86 7,381.19 7,346.00
Volatility: 10 14 14
Volume: 482,178,752 689,425,472 719,371,328
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FTSE 100 INDEX is currently 3.1% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect very strong flows of volume into .FTSE (bullish). Our trend forecasting oscillators are currently bullish on .FTSE and have had this outlook for the last 11 periods.
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