FTSE 100 futures could fall further after UK economy sees 20% decline

FTSE 100 futures are likely to trade lower over the weekend, with stocks under pressure after the UK economy recorded a 20% decline in April.

FTSE 100 futures are trading marginally higher, but UK stocks ended the week in negative territory with the blue-chip index losing close to 400 points and falling 6% over the last five trading sessions.

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Equities tumble after UK economy sees 20% slump

UK stocks were unable to hold onto their earlier gains after news hit that the UK economy shrank by a record 20.4% in April, with the Covid-19 pandemic and subsequent government-imposed lockdown hitting British industries hard.

All sectors have been negatively impacted by the viral outbreak, but construction got hit hardest of all, with 16.4% of the industry reporting zero turnover in April.

The latest economic data shows that the UK economy has shrank by around 25% between February and April, with overall output during the month coming in at the lowest levels seen since 2002.

‘Disastrous’ no-deal Brexit outcome likely

Piling further pressure on British businesses, the UK government ‘formally confirmed’ to the European Union (EU) that it will not extend the Brexit transition period and unveiled its post-Brexit border plans.

‘The moment for an extension has now passed,’ Cabinet Office minister Michael Gove said.

The decision by the government to push ahead comes despite first ministers of Scotland and Wales, Nicola Sturgeon and Mark Drakeford, penning an open letter to British Prime Minister Boris Johnson demanding an extension to the transition period past the end of December.

In their letter, Sturgeon and Drakeford warned the prime minister that by rejecting an extension to the Brexit transition period amid the Covid-19 crisis could lead to a ‘disastrous no deal outcome’ and could be devastating for the UK economy.

FTSE 100 hits three-week low

Yesterday saw a swift downward move for the FTSE 100 that wiped out the gains made since 22 May. The price broke below rising trendline support from the March low, but managed to hold above the 50-day simple moving average (SMA) at 5950, for the time being, according to Chris Beauchamp, chief market analyst at IG.

‘The index has managed to edge higher overnight, with today’s price action likely to be crucial; if the it can hold 5900 and recover 6100 then a more bullish view will start to emerge once again,’ he added. ‘Alternatively, further declines below 5900 open the way to 5730 and 5500.’

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