FTSE Falls on Global Retracement & Government Budget

The chancellor of the exchequer laid out the plans to boost growth and balance the budget.

Gino Bruno D'Alessio•Thursday, October 31, 2024•2 min read

ftse drops lower on budget announcement

The chancellor of the exchequer laid out the plans to boost growth and balance the budget.

The global stock market has had a weak of reckoning and the FTSE is down over 2% for the week. Main indices such as the NAS100, down 2.1% from this week’s high, and the DOW down over 1%, are leading the way.

Investor concerns are rising on just how timely the Fed interest rate cuts have been. And while it seems likely the economy will have a soft landing; the current stock valuations may reflect a too optimistic revenue growth.

The UK stock market is also coming to terms with the budget announced yesterday, but the contents of which have been widely leaked. The confirmation of the higher taxes and extra government spending is taking its toll on the market.

The government has changed the fiscal rules that will allow it to spend more money. The new rules are expected to allow an extra £15.7 billion of spending per year. In total, Reeves committed to capital spending of £100 billion over the next 5 years.

Gilt markets have reacted to the expectation of larger government bond issuance. 10-year gilt prices lost 0.8% on the day yesterday and are down 0.56% so far today. Reeves also stated that the government plans to eliminate the budget deficit by 2029 – 20230.

ftse breaks out of major support level, eyes further lows

Technical View

The day chart above for the FTSE shows a market that has descended into bear territory. Prices are now below the Ichimoku cloud, with all components of the system indicating a bear trend. Adding to that is the breakout of a major pattern.

The blue rectangle denotes the sideways trend that has been ongoing since early September. Yesterday’s breakout to the downside also coincided with the market breaking below the cloud. Today’s candle looks likely to confirm the breakout.

The next support level is at 8,036 (black line), which coincides with previous support and resistance levels. Should that level break, the market will find the next major support at 7,910 (grey line).

To the upside, the market will meet major resistance at the bottom of the cloud. Further resistance can be found at the top of the cloud at around 8,300.

FTSE

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.