FTSE 100 could see gains eroded in weekend markets

The blue-chip index managed to rebound above 6000 this week, but the benchmark’s gains could be eroded over the weekend with investors worried about a second wave of coronavirus cases as the UK economy reopens.

The FTSE 100 closed marginally lower on Thursday at 6015.25 points, with the index capable of extending its losses on Friday and over the weekend.

Over the last four sessions the benchmark has gained 3.8%, but investors are concerned about a second wave of coronavirus cases as the UK economy gradually emerges from lockdown.

FTSE 100 futures are trading slightly lower at 6029 at the time of publication, suggesting that the index will open in negative territory on Friday.

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FTSE 100 bounce runs out of steam

The bounce from Thursday’s lows has stalled, with the FTSE 100 price falling back yesterday, according to Chris Beauchamp, chief market analyst at IG.

‘If it can hold 5920 then a move higher may resume, targeting 6140 and then 6200, the peak from the end of April,’ Beauchamp said.

‘Having twice held 5650 this month, sellers will need to drive the index below this level to ensure a bigger drawdown develops,’ he added.

US-China trade tensions return

Remerging tensions between the world’s two largest economies will likely take its toll on UK stocks, with Washington highly critical of China’s handling of the Covid-19 outbreak.

On Wednesday, US President Donald Trump announced that he had approved a potential $180 million arms sale to Taiwan, a decision that will likely anger Beijing and worsen relations between the two countries.

‘The proposed sale will improve the recipient's capability in current and future defensive efforts,’ the Trump administration said in a statement. ‘The recipient will use the enhanced capability as a deterrent to regional threats and to strengthen homeland defence.’

Investors also had to digest new economic data that showed the UK economy had contracted again in May, according to research carried about by IHS Markit.

Earlier this month, the Office of National Statistics (ONS) said that UK economic growth declined by 2% in the first quarter (Q1) 2020, with researchers at NIESR forecasting Q2 growth to decline as much as 30%.

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