Global Markets are Taking Cues from Upcoming Fed Meeting and US Elections:

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Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.26% on 05 November 2024. Utilities, Technology & Consumer Cyclicals sector demonstrated a substantial growth. While, Real Estate & HealthCare sector has faced a significant decline.

Macro Update:  The $19 billion merger between Vodafone and Hutchison's Three UK is expected to receive regulatory approval, as Britain's need for substantial investment outweighs immediate competition concerns. Labour finance minister Rachel Reeves’ recent budget, which includes significant increases in spending, taxes, and borrowing, aims to temporarily boost growth but could limit the Bank of England’s ability to cut rates. According to the Office for Budget Responsibility, Reeves' plan will increase annual spending by £70 billion until 2030, potentially doubling GDP growth from 1% in 2024 to 2% by 2025. In October, British consumer spending showed only slight growth amid budget-related uncertainty and rising energy costs. The British Retail Consortium reported a 0.6% annual increase in shop spending, down from September's 2.0% growth. Barclays data also indicated slower consumer spending.

Top Market Movers: Among top gainers on FTSE 100 index, Severn Trent PLC (LSE: SVT) witnessed a rise of 3.89% followed by United Utilities Group PLC (LSE: UU.) which gained around 3.57%.

Commodity Update: The U.S. dollar started Tuesday on the back foot as traders adjusted positions ahead of the U.S. presidential election, following polls that weakened bets on a Republican win by Donald Trump. In commodities, gold and silver declined, with gold dropping 0.46% to $2,734.50/oz and silver falling 0.59% to $32.42. Meanwhile, copper rose 0.54% to $9,734.50/ton. Brent crude eased 0.2% to $74.93/barrel after a recent rally, as investors awaited election results and a key political meeting in China for further market direction. Oil surged Monday after OPEC+ postponed production increases, tightening the supply outlook. All eyes are now on the election and the upcoming FOMC rate decision for more clarity on market trends.

Our Stance: Global markets are in a cautious holding pattern as investors brace for the outcomes of two major events: a closely contested U.S. presidential election and the Federal Reserve's policy decision. Meanwhile, bond investors are adopting a neutral but cautious approach ahead of the Federal Reserve’s policy meeting, which has been rescheduled to avoid coinciding with the election. The Fed is expected to lower its interest rate by 25 basis points, following its aggressive 50-basis-point cut in September, signaling a continued push to support economic stability amid uncertain political and financial landscapes. The Fed’s likely rate cut may offer some reassurance but also reflects the challenging economic climate, which could persist if political and economic uncertainties continue. A prudent strategy for investors might involve maintaining a diversified, balanced approach while preparing for potential market turbulence in the near term.

FTSE 100

The FTSE index closed at 8,184.24, marking a modest gain of 0.09%. A bullish candlestick pattern has emerged, sparking increased investor interest as trading volume rises. However, the index remains below the 21-period Simple Moving Average (SMA), which now acts as a key resistance level. The Relative Strength Index (RSI) stands at 43.90, signalling a potential shift toward bullish momentum as the index shows signs of recovery.
On the weekly chart, the 50-period SMA continues to offer a solid long-term support level, suggesting a favourable outlook if the index holds above this point. Key technical levels to watch include resistance at 8,400 and support at 8,100. A breakout above 8,400 could trigger further bullish sentiment, while a dip below 8,100 might signal deeper declines. With the index trading within a narrow range, any breakout—whether upward or downward—could set the tone for the next significant market move. Monitoring these levels will be crucial for anticipating shifts in trends.