FTSE 100 Bear Market To Continue On Lockdown Fears

DAX Index
DAX Index

The FTSE 100 index is set to decline by more than 1% as UK braces itself for an Italy-style lockdown. The warning from Boris Johnson came as the number of confirmed coronavirus cases in the country rose to more than 5,600. More than 280 people have died from the disease.

There are fears that the lockdown could push the UK into a deep recession as factories, shops, and schools remain shut. According to KPMG, the country’s economy is set to decline by between 2.6% and 5.4% in 2020.

Over the weekend, companies like McDonalds, Primark, and Waterstones said that they would close their UK operations. Other big manufacturers like Nissan, Honda, and Toyota have shut their operations to protect their employees. This has raised fears that some of these manufacturers may never recover since they are already suffering because of Brexit.

The FTSE 100 index has declined by more than 30% this year, with all its constituent stocks being in the red. Among the big losers are companies like BAE Systems, RightMove, and Intercontinental Hotel, which has declined by more than 30%.

Coronavirus is not the only reason why the FTSE 100 index has declined. Market participants are concerned about Brexit and whether the UK and EU will reach a consensus before the end of the year. This is likely because the negotiations will likely be halted now that Michel Barnier, the chief EU negotiator has been diagnosed with the disease.

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FTSE 100 Index Technical Analysis

FTSE 100 index futures declined by more than 1.00% at 0700 GMT on Brexit and coronavirus concerns. The index has been on a sharp downward trend after reaching its YTD high of £7626 on January 20 this year.

If the FTSE 100 index drops by a similar 1%, it will open at about £5,138, which is 51 points below its Friday’s close of £5,190. The price will be slightly higher than last week’s low of £4,895.

Technically, the index is set to continue declining as the macro picture in the country remains weak. The trend will remain bearish especially if the index moves below £5,000 again.

On the flipside, the FTSE 100 index futures have pared some of the gains made earlier today, and are currently trading at £4,965. A move above £5,000 in the futures market could push the FTSE 100 index higher.

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