Outlook on FTSE 100 futures worsens ahead of weekend trading

The FTSE 100 plunged 2.46% in early trading today, before closing 2.45% down. The weekend market is set to be bearish after worrying PMI & mortgage data.

The FTSE 100 has ended the week in bad shape following a string of worrying figures laid bare the likely after-effects of the coronavirus pandemic.

UK government ministers have voiced concerns about convincing the public to leave their homes and get the economy moving again. Meanwhile data from April’s manufacturing purchasing managers’ index (PMI) and the Bank of England’s mortgage lending numbers also spell trouble.

Technical analysis: FTSE 100 approaches dangerous territory heading into the weekend

The last two days have been nothing but bad news for the FTSE 100 index. During Thursday, the FTSE 100 suffered its worst daily slump in a month from a high of 6123 to 5897 as London’s blue-chip index started to show signs of weakness based on eye-opening economic data.

The worrying technical trend developed further still today, as the index fell below its 50-day simple moving average (SMA) at 5881. In addition, the FTSE 100 has also fallen below rising trendline support from previous lows in March.

These signs suggest that the index is likely to maintain its downswing over the weekend, given that significant resistance appears at the 5800 level.

Should the FTSE 100 retrace its steps towards 5500, the index runs the risk of paring a huge chunk of the month-long gains through April.

‘[This latest decline] could bring 5500 into view, or down to 5300 as possible support,’ Chris Beauchamp, chief market analyst at IG said.

‘A reversal back above 5900 is needed to revive the bullish view,’ he added.

April’s PMI index reveals worst month in almost 30 years

A reversal towards 5900 seems like a long way off after IHS Markit and the Chartered Institute of Procurement & Supply (CIPS) published April’s manufacturing PMI. The survey of UK manufacturing firms revealed the biggest month-on-month decline in manufacturing output, new orders, new exports and employment in the poll’s 28-year history.

The index fell from 47.8 in March to 32.6 – below Reuters’ initial flash forecast of 32.9. The further the index is from 50, the greater the UK’s industrial output is diminishing.

Rob Dobson, director, IHS Markit, said: 'Huge swathes of industry were hit hard by company closures, weak global demand, lockdowns and social distancing measures in response to COVID-19.'

Slumping mortgage approvals also a worry for UK property market

There are also growing concerns about the UK property market, after the Bank of England published mortgage lending data for March. The figures revealed mortgage approvals for property acquisitions dropped to a seven-year low of 56,161, down from 73,674 in February.

Although the UK’s FTSE 100 housebuilders benefitted during the turn of the New Year with the certainty provided by December’s General Election result, the coronavirus lockdown could spark a decline in property values by as much as 5% in the next quarter. An inevitable rise in unemployment and declining incomes, combined with reduced consumer confidence, will be the main drivers.

How to trade the FTSE 100 this weekend

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The weekend prices for indices and forex are quoted separately to their weekday counterparts, based on our view of the prospects for that market given client business and news flow. As a result, you can use these markets to hedge against risk on your weekday positions.

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