FTSE 100 futures dragged lower after Fed offers grim economic outlook
FTSE 100 futures are down 4% after US Federal Reserve Chairman Jerome Powell warns of grim outlook for the US economy, with the news likely to weigh on UK stocks this week.
FTSE 100 futures are down 4% after US Federal Reserve Chairman Jerome Powell warns of grim outlook for the US economy, with the news likely to weigh on UK stocks for the remainder of this week.
UK stocks were dragged lower on Thursday by Powell’s forecast, with the FTSE 100 closing almost 4% lower at 6076.
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FTSE 100 drops into Fibonacci support
The FTSE 100 has seen sharp declines over the course of this week, with yesterday’s drop through the head and shoulders neckline at 6312 providing us with a swift slump back into Fibonacci support. That 76.4% Fibonacci level has provided support thus far, with the price holding up in early trade, according to Josh Mahony, senior market analyst at IG.
‘The uptrend does still remain in play on this four-hour chart, with the ability to remain above 6041 key to seeing the bullish trend persist,’ Mahony said.
‘For today, we need to see whether this Fibonacci support holds or not, with a break below that 6153 level signalling a potential continuation of this decline, and move towards that critical 6041 level,’ he added.
OECD warns of 'tightrope walk to recovery'
On Wednesday, the Organisation for Economic Co-operation and Development (OECD) said that the global economy faces a ‘tightrope walk to recovery’.
With little prospect of a vaccine becoming widely available this year, and faced with unprecedented uncertainty, the OECD presented two equally likely scenarios – one in which the virus is brought under control, and one in which a second global outbreak hits before the end of 2020.
‘If a second outbreak occurs triggering a return to lockdowns, world economic output is forecast to plummet 7.6% this year, before climbing back 2.8% in 2021,’ the OECD said.
‘At its peak, unemployment in the OECD economies would be more than double the rate prior to the outbreaks, with little recovery in jobs next year.’
‘If a second wave of infections is avoided, global economic activity is expected to fall by 6% in 2020 and OECD unemployment to climb to 9.2% from 5.4% in 2019,’ the OECD added.
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