FTSE 100 set for rebound as UK unveils new coronavirus measures

The FTSE 100 was up as much as 5.51% in pre-market hours on Tuesday, after new financial measures aimed at cushioning the coronavirus’ economic impact were announced.

The FTSE 100 Futures Index - a derivative of the main FTSE 100 index - was up as much as 5.51% in early Asian trading hours on Tuesday 17 March, retracing around 153.8 points from the previous day’s close.

FTSE 100 futures retrace slightly as UK steps up coronavirus efforts

The Footsie has since retreated slightly. As at 1.45pm Singapore time, the 24-hour index is trading 1.97% higher at 5,217.5.

The futures index’s improvement came after UK Prime Minister Boris Johnson said on Monday 16 March that the government will be unveiling more financial and health measures to help the country cope with the coronavirus’ devastating economic impact.

The aviation industry, which has been heavily impacted by the outbreak, is among the business sectors that will be receiving aid as part of the new measures, according to BBC News.

Johnson added during a press conference at 10 Downing Street that all UK residents should avoid ‘non-essential’ travel and minimise social contact as much as possible, as the country’s case and death toll hit 1,543 and 55 respectively.

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He also urged employees to work from home where possible and at-risk individuals to stay home for 12 weeks, as part of a ramped-up national effort to bring down the number of cases to very low levels.

Finally, Johnson said the number of cases in the UK was approaching ‘the fast growth part of the upward curve’.

These new measures are in addition to the £30 billion economic stimulus package that was announced last week by new Chancellor Rishi Sunak. The Budget includes the suspension of business rates for a wide number of UK firms, extending sick pay benefits to more employees, and boosting funding for the National Health Service.

Tuesday’s market: ‘candidate for gains as seen historically’

As IG Asia market strategist Pan Jingyi also wrote in a client note, rebounds the day after a soft start to the trading week could be indicative of Tuesday’s market being a ‘candidate for gains as seen historically’, although she was referencing the US stock market.

On Monday 16 March, the S&P 500 index crashed 11.98%, the Dow Jones Industrial Average sunk 12.93%; the DAX Performance Index plunged 5.31%, while the FTSE 100 dropped a significant but more manageable 4.01%.

While overnight proceedings on the futures market do not always translate into regular day trading, they are often a good indication of where the official benchmark will open. Based on pre-market numbers and historical trends, the Footsie is likely looking at some gains today.

Yesterday, the Dow 30 futures index went the ‘limit down’ maximum of 5% during Asian trading hours. Twelve hours later, the official Dow Jones Industrial Average index sunk over 8% upon opening, triggering a trading halt.

Pan, however, was quick to add that caution should still be taken regardless, after US President Donald Trump’s latest comments that the virus could potentially last until at least August this year within the US – potentially undoing any relief that the global markets would have otherwise enjoyed on Tuesday.

Regarding the FTSE, IG UK chief market analyst Chris Beauchamp wrote on Monday that any rebounds towards 5,400 may provide the chance to sell again, with previous lower highs at 5685 and then 5894 providing near-term targets to the upside.

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