FTSE 100 suffers in early trading after the Fed warned that high unemployment rate would persist despite the strong relief measures form the central bank and the government. Federal Reserve kept the interest rates on hold at 0.0-0.25%, as was widely expected from markets. The Fed will continue to purchases treasuries at the current rate of $80 billion per month and mortgage-backed securities at $40 billion per month. Governor Powell said that interest rates will remain at near-zero levels until at least 2022 or until the US economy is on track to achieve maximum employment.
The much anticipated Fed projections showed that the economy would contract by 6.5% in 2020, while in 2021 will grow by5% and in 2022 it will see a growth of 3.5%. The unemployment rate estimated to be 9.3% in 2020 and then it is expected to drop to 6.5% in 2021 and to 5.5% in 2022. In 2023, the level is projected to be 4.1%.
In corporate news, Ocado online retailer successfully raised £1bn to exploit the rapid change in internet grocery shopping habits sparked by the COVID-19 crisis.
Lloyds Banking Group (LLOY) is 5.65% lower at 33.15, Vodafone (VOD) is 6.28% lower at 127.70, Barclays (BARC) is 3.10% lower at 120.11, RBS is 3.81% lower at 123.95, BT Group is 3.49% lower at 116.25 and Tesco is 0.18% lower at 226.70.
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FTSE 100 Index Analysis
FTSE 100 is 2.48% lower at 6,173 as the correction from recent highs accelerates today breaking below the 100-day moving average. The FTSE 100 index technical outlook is neutral now and only a return above the 100-day SMA can attract the bulls.
On the downside, initial support for the FTSE will be met at 6,152 the daily low. Next support zone stands at 6,071 the low from June 1. If the sellers break that level then the next support is at 5,918 the 50-day moving average.
On the other side, the first resistance for the FTSE 100 is at 6,329 the daily top. The next hurdle stands at 6,171 the high from yesterday’s trading session. Next level to watch is at 6,478 the high from June 9.