What could stop the FTSE 100?

Tuesday, 30th July 2019 14:00 - by Rajan Dhall

The FTSE 100 is on a great run at the minute and let's have a look at some of the key reasons. 

Over the last week or so we have had the confirmation of Boris Johnson as the new UK prime minister. Be that what it may GBP has not taken a liking to the prospect of a harder Brexit. The pound has fallen to levels not seen since the aftermath of the election and today trades at 1.2120. This is great for exporters and companies denominated in USD which most of the FTSE 100 are. The new Chancellor has also promised a package of support for companies affected by Brexit including farmers, which is a welcome boost for the UK. 

There has also been the announcement of two key buyouts. First of all LSE (London Stock Exchange) have bought Reuters product Refinitiv for a proposed USD 27bln. Adding to that news in the fast-food sector Just Eat has been bought by Takeaway.com in a bid to take on Uber and Deliveroo. Great timing for those long of the all-share indices. 

Shorter-term I feel like the move is overdone, pricing in the no-deal outcome of Brexit before talks have even taken place is not the smartest thing to do. Let's see what Boris and Co. have up their sleeves as this could all be a ploy to get a better deal from Brussels. On the chart below there is a resistance level at 7777 that could be a formidable barrier. That is not to say getting a deal will be bad for the FTSE 100 but it would definitely push GBP higher

Let's not forget we have a Fed meeting this week. a 25bps cut is priced into the markets but it will be interesting to see how dovish the FOMC actually are. Any real dovish commentary will be met with a rise in equities as we will have loser monetary policy for longer ie bad news is good news for equities. It's hard to see them being too dovish as the data from across the pond has been holding up (apart from the PMI's), the trade war situation could be the main catalyst for dovishness but analysts will be watching carefully.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.