FTSE back to critical resistance as bulls reappear

The British FTSE 100 equity index advanced on Tuesday, slowly returning to the key resistance as investors continue to ignore negative news.

UK inflation remains elevated

The latest British Retail Consortium-NielsenIQ tracker showed that food inflation increased to 13.3% in December from 12.4% a month earlier, in the absence of any significant corporate news to stimulate trading activity.

“Another difficult year for consumers and businesses as inflation shows no immediate signs of diminishing,” the BRC predicted of 2023.

“Retailers will continue to work hard to support their customers and keep prices low. However, further high investment in prices may no longer be viable once the government’s energy bill support scheme for business expires in April,” said BRC chief executive Helen Dickinson.

Furthermore, according to Reuters, a monthly survey by Citi and YouGov on Wednesday showed that the British public’s estimates for inflation over the next 12 months dropped from 6.1% in November to 5.7% in December.

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The survey also revealed that public estimates for future inflation declined from 3.9% to 3.6% over the next 5–10 years. The latest findings, according to Citi, indicate a lessening risk of more entrenched inflation until 2023.

US economy slows notably

The manufacturing sector of the US economy is at its lowest since the COVID-lockdown crisis, as confirmed by yesterday’s final PMI print for December, and today’s ISM data validated that weakness with a worse than predicted 48.4 print (down from 49.0).

ISM Manufacturing has been down for nine straight months, which is the longest streak of decreases since 1974–1975.

“Growing uncertainty and plummeting demand suggest headwinds for manufacturers will spill over into the new year,” S&P Global’s Siân Jones said yesterday.ň

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The global manufacturing PMI from JPMorgan dropped to a 30-month low of 48.6 in December and stayed below the neutral level of 50.0 for the fourth consecutive month.

As previously said, the critical resistance zone is between £7,600 and £7,700 and when the index closes above it, we might see a massive rally toward £8,000 as bears would be forced to retreat.

On the other hand, should bears defend the resistance again, the price might decline back to the £7,500 area.