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FTSE 100 Growth at the Back of Correction in the Bond Market

11/16/2022 12:45 PM

At the moment, the leading index of the London Stock Exchange FTSE 100 shows an upward trend in the area of 7385.5. The UK stock market is trading neutral, given the possible increase in inflation to 10.7%, as analysts predict, which is the main problem for companies, as it leads to a tightening of monetary policy, and, consequently, to an increase in the cost of servicing debt obligations.

Large telecom operator Vodafone Group Plc. reported a 4.4% decline in adjusted EBITDA in the first half of the year, which provoked a revision of forecasts for the end of the year. The company now expects the figure to be in the range of 15.0-15.2 billion euros, which is lower than the previous estimate of 15.0-15.5 billion euros. Free cash flow projections were also cut from 5.3 billion euros to 5.1 billion euros.

The situation with bonds, which continue the downward correction, continues to support the stock market. The yield on 10-year bonds fell to 3.316% from 3.630% last week, and on conservative 20-year bonds it fell to 3.652% from 4.021%.

The growth leaders in the index are Melrose Industries Plc. (+3,30%), Scottish Mortgage Investment Trust Plc. (+3,12%), BAE Systems Plc. (+1,71%).

Among the leaders of the decline are Ocado Group Plc. (-16.79%), Vodafone Group Plc. (-7.94%), Just Eat Takeaway (-4.85%).

On the daily chart, the index quotes continue corrective growth, having reached the resistance line of the descending channel.

Technical indicators are holding a buy signal that remains fairly strong: the fluctuation range of the Alligator indicator EMAs is expanding and the histogram of the AO oscillator is forming ascending bars, retreating from the transition level.

Support levels: 7270.0, 7010.0. | Resistance levels: 7410.0, 7570.0.

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