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FTSE index ended down 12% for 2018, Brexit angst and global growth concerns to blame

  • London stocks ended 2018 sluggish with the FTSE drifting through the 6700's to the downside posting a low of 6676 from a high of 6767 as investors weighed up signs of improving relations between the US and China against disappointing Chinese manufacturing data.

The FTSE 100 ended the last trading day of the year down 0.1% at 6,728.13, settling around the lowest level since the Brexit vote. Across the Channel mainland European shares in the pan-European Stoxx 600 were up 0.35% with the German and Italian markets closed - (The Stoxx was on track to log a 13% loss for the year).

Brexit worries linger which is half to blame for the index ending down 12% for 2018. It has been the worst year since the 2008 financial crisis. Concerns over global trade and growth have been a widespread weight on global equity prices also. On the Brexit front, it can be a double-edged sword for UK stocks, considering positive headlines that boosts the value of the pound weighs on multinationals that depend on a weaker domestic currency. Reports that the Brexit deadline could be pushed back if Prime Minister Theresa May's deal gets voted down by Parliament sent sterling higher and weighed on stocks. In a Sunday Times interview, International Trade Secretary Liam Fox said that the chances of Britain leaving the EU were 50-50 if Parliament rejects May's withdrawal agreement. 

Elsewhere, equity markets have been plagued by the light of the Chinese economy following the PMIs miss overnight which has fanned the flames of concerns over global growth for 2019. The data highlighted weakness in Chinese manufacturing, with the sector moving into contraction for the first time in over two-years and the US-China trade spat is hurting Chinese exports. 

However, on a more positive note, from weekend press reports, Trump hailed progress over Sino/US trade relations, and a mid-level US delegation is reportedly going to be heading to China in the week of January 7th to initiate the next round of trade talks. Trump tweeted on Saturday: "Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!" Also, a statement on Sunday from Lu Kang, the spokesperson for China's foreign ministry, seemed to confirm Trump's trade optimism. 

Meanwhile, the partial U.S. government shutdown continues to concern investors, supporting a risk-off play in the FX space. President Donald Trump tweeted before the weekend and threatened to “close the Southern border entirely,” if congressional Democrats don’t approve funding for a border wall,  complaining that the U.S. was losing money to Mexico through the North American Free Trade Agreement, signed in late November after 15 of negotiations. 

Best and worst

As for the performers, Ocado Group (OCDO) ended 790.00p, up 2.86%. Then Rentokil Initial (RTO) ended 335.20p up 2.51% with Micro Focus International (MCRO) ending 1,381.00p 
 up 2.07%.  The worst performers were 3i Group (III) 773.40p, down -2.77%, British American Tobacco (BATS) ended 2,505.50p, down -2.47% and Next (NXT) ended 3,979.00p, down -1.70%.

FTSE levels

The index remains submerged below the 50% Fibo of the 2016 bull trend with a low, (6536), however, recovering to piercing the monthly pivot located at 6674. Next target is the 61.8% fibo of 6413 and the 76.4% located at 6061. On the upside, an immediate target sits at R1 6812. 

  • Support levels: 6586 6448 6360
  • Resistance levels: 6812 6900 7038

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