FTSE 100 set to slump after gains eroded by UK recession
The blue-chip index nearly ended the week in the red after almost all its earlier gains were eroded on Friday, with investors concerned about the UK economy after it crashed into a recession following a quarterly slump.
The FTSE 100 closed 1.5% lower on Friday, with the final trading session nearly eroding all of its earlier gains, with investors concerned about the UK economy after it crashed into a recession following a major quarterly slump.
Earlier in the week, investors appeared to shrug off the news that UK GDP shrank by 20.4% between April – June (Q2) 2020, with the index moving higher rather than faltering.
Instead, traders appeared to focus on the prospect of a potential vaccine being developed, with the race heating up among drug makers like AstraZeneca, GlaxoSmithKline, Pfizer and Moderna, as well as other smaller biotech firms.
Thankfully, the blue-chip index managed to stabilise after the morning session on Friday, helping the FTSE 100 end the week 1% higher.
FTSE 100 futures are down more than 1.8%, however, after close on Friday, suggesting that IG’s Weekend UK 100 market will trade lower on Saturday and Sunday.
FTSE 100 recovery left waiting for US stimulus deal
Investors could have to wait some time for the FTSE 100 to be lifted higher by a US-led surge in equities, with a wide-ranging stimulus package seemingly some ways off after Congress failed to reach an agreement on Friday.
The delay to the deal, which aims to tackle additional unemployment benefits, stimulus checks and eviction protections, is essential to support tens of millions of US citizens who, without government aid will struggle to cover rent and food bills.
There are many disagreements Republicans and Democrats have about the new stimulus package, chief among them the final figure. Democrats are pushing for a Covid-19 relief package valued at $3.4 trillion, while their counterparts across the aisle have repeatedly said that they will only support a much smaller deal in the region of $1 trillion.
As it stands, US citizens and investors will have to wait until September for both political parties to debate the issue again, with Congress breaking for August recess with no coronavirus relief package in sight.
FTSE 100 drops below Fibonacci support
The FTSE 100 has dropped below the 76.4% Fibonacci support level (6163), following a mid-week rally into trendline resistance, according to Josh Mahony, senior market analyst at IG.
‘That downside move is set within a wider bullish trend seen over the past three-weeks,’ Mahony said. ‘As such, we need to see the 6122 level broken to bring expectations of a protracted period of weakness for the FTSE.’
‘Until then, the uptrend remains intact (just),’ he added.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Take a position on indices
Deal on the world’s major stock indices today.
- Trade the lowest Wall Street spreads on the market
- 1-point spread on the FTSE 100 and Germany 30
- The only provider to offer 24-hour pricing
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.