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FTSE 100 Boosted By US Employment Report

ByThierry Laduguie
Published 09/06/2014, 08:14

After the ECB announcement last Thursday, the market was given a further boost by the US employment report on Friday. In the US the recovery is taking shape but in Europe the situation is different. More than five years after the the financial crisis that threatened the stability of the banking system, the economy has not yet recovered. Despite all the efforts of the ECB, economic activity in Europe is so weak that deflation is now the main concern.

In the US the economy is doing better thanks to the unprecedented amount of money injected by the Fed into the economy. The Fed is still buying, the question is what will happen after October when the Fed stops buying? I have referred to the expression "investors drugged up by central banks", what I mean is that investors have become so addicted to a rising stock market (created by the central banks actions) that they do not have any alternative strategy to cope with the market when central banks will stop supporting the market.

There is a high probability the stock market will crash. When too many investors are doing the same thing (buying) with no alternative strategy and are increasing their leverage at the same time (because it's so obvious the market will rise) investing in the stock market for too many people becomes a no brainer.

The positive news coming from the ECB, the nonfarm payrolls and today's Japanese GDP is the reason why the FTSE will open near the top of its recent trading range. Because the FTSE 100 has been lagging the S&P 500 there are many buyers waiting to get back into the market, this is why there is potential for the FTSE to rise above the key level of 6882.

FTSE 100

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