FTSE rises but global stocks set to remain undermined

The energy crisis in Europe continues to be closely watched by investors, who are also weighing other dangers including a slowing Chinese and global economies. The pressure on the world stock markets isn't going away as they wait for the Federal Reserve's highly anticipated interest rate decision today.

Nevertheless, several of Europe's top indexes, like the FTSE, have been able to recover. However, I believe that the fall is the direction of least resistance, and that the selling pressure will probably pick up again amid a pessimistic macro-outlook.

Even if the general climate remains pessimistic, today's somewhat stronger tone is a result of government assistance for businesses and people who have been severely hampered by the continuing energy crisis. Gas and energy rates for residential companies, for instance, in the UK, will be reduced by almost half for a period of six months. The new government assistance program follows the announcement by ministers of a £150 billion plan to assist people with their energy costs for two years. Despite the fact that this is undoubtedly wonderful news, the taxpayer will not be reimbursed for the cost of the corporate energy package.

The UK is already deeply in debt as a result of its excessive expenditure during lockdowns. With public sector net borrowing increasing to £11.8 billion in August, the UK government borrowed more money than was anticipated. It's worrying that the cost of paying that debt increased to an all-time high. To give you an indication of how expensive government borrowing has become, interest payments in August were £8.2 billion, an enormous £1.5 billion more than during the same time last year.

With multiple quarters of negative GDP ahead of us and interest rates expected to climb further, the longer-term prognosis is, at best, hazy, even if government expenditure may help to allay the short-term worries. The Bank of England is in a very precarious situation as a result of double-digit inflation and a faltering economy. It has previously raised rates six times, with the most recent rise being in August 2022, when it increased rates by 50 bps to 1.75%. Analysts anticipate a further 0.5% rise to 2.25% on Thursday, however there is a remote possibility of a 0.75% increase.

The Federal Reserve's rate decision tonight will be the main topic of discussion right away. Bond rates and the value of the dollar have risen significantly as a result of the Fed's vigorous tightening of monetary policy to limit inflation. The majority of experts believe that the third rate rise of 75 basis points will be made today. Risky investments might be destroyed by the bears if it is higher. Even if it is the anticipated 75 basis point increase, the Fed is likely to maintain its aggressive attitude since inflation is far from low enough for it to do so. Because of this, it is doubtful that the global stock markets would have a significant comeback right now.

The energy crisis in Europe is still having a significant impact on the economy of the Eurozone. In order to protect Russian territorial integrity, Russian President Putin today said that military reservists will be dispatched to Ukraine as part of a "partial mobilisation" of his troops. The most recent action is a step up in Russian aggressiveness, which is bad news for Europe given the state of the gas supply.

Unfortunately, it seems that Russia will continue to bolster its military presence in Ukraine, which might result in a long, chilly winter for the rest of Europe, which depends on Russian energy.

Additionally, the Chinese economy is contracting because to the government's zero-covid policy, the weakening of the global economy, and rising pricing pressures.

The macro environment is still far from favorable for stocks, therefore the FTSE and other global indexes should continue to struggle and encounter significant headwinds even after modest recovery.

The UK index has once again rebounded off the trend line's support, but the lower highs and other worldwide indexes' breakdowns portend poorly for the UK index. I believe it's just a matter of time until the trend line is broken. If that occurs, we may see a return of 7,000 and eventually lower levels.