The FTSE 100 index is down by more than 2.30% as investors remain cautious about coronavirus. Other Asian and European indices like the DAX index, CAC 40, and Nikkei 225 are down by more than 2% also.
Coronavirus worrying for the UK
The FTSE 100 declined today mostly because of the fears of another wave of coronavirus in China. This is after Beijing reported a new cluster of the virus during the weekend. The government confirmed about 45 new cases on Saturday and another 48 on Sunday. Meanwhile, in the United Kingdom, the number of daily cases has remained relatively stable at about 1,500. This means that the risks of a prolonged lockdown are real.
Brexit remains a concern
The FTSE is also falling because of Brexit. In a tweet last week, David Frost, the chief UK negotiator said that the country would not request an extension to the transition period. He also said that the UK will reject it if the European Union requests for an extension. This means that the two sides are still in danger of having no agreement on Brexit, which will be dangerous for companies in the FTSE 100.
BP shares lead losses
BP, the oil supermajor, was the worst-performing stocks in the FTSE 100. This is after the company surprised investors by announcing a new write down worth more than $17.5 billion. The decision came as the company revised its longer-term energy price assumptions as the world moves away from fossil fuels. The company expects the longer term crude oil price to be about $55, a 30% decline from the previous estimate.
Other top movers in the FTSE 100
While the outlook for the FTSE 100 remains dire, there is a light at the end of the tunnel. The Bank of England (BOE), which will meet later this week could provide more stimulus. Analysts expect the bank to leave rates unchanged and increase its quantitative easing program.
All companies in the FTSE 100 are in the red today. The worst-performers are Melrose Industries, Fresnillo, BP, Rolls Royce, and Compass. These shares dropped by more than 5%. On the other hand, the best-performers are Bunzl, Johnson Matthey, Astrazeneca, and Reckitt Benckiser.
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FTSE 100 technical outlook
FTSE 100 is trading at £5968, which is significantly below £6,514, which is the highest point in May. The price is now below the 100-day and 50-day exponential moving averages and is slightly above the 38.2% Fibonacci retracement level. Also, today’s candle stick is bigger than the bullish candle that happened on Friday, which is an indication that bears are taking control. Therefore, the index may continue falling as bears attempt to move below the 38.2% retracement at £5,885.
On the flip side, a move above the 50% retracement at £6235 will invalidate this trend.
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