FTSE 100 crosses key support as M&G and Melrose Industries lag

Dovish comments from BoE’s Saunders Send GBPUSD Lower
Dovish comments from BoE’s Saunders Send GBPUSD Lower

The FTSE 100 index is down sharply today as investors react to the ongoing skirmish between the US and China. The index is down by more than 1% and is trading at its lowest level since July 14. The declines today means that the index has fallen in the past five consecutive days. Similarly, other indices in Europe are also in the red, with the DAX index, CAC 40, and Stoxx 50 down by 2.10%, 1.90%, and 2%, respectively.

We believe that the FTSE 100 is falling because of the US-China tensions, earnings and Brexit.

China-US tensions

Earlier today, China ordered the United States to close one of its embassies in the country. That was in retaliation to the US decision to close a Chinese embassy in Houston. The decision by the Chinese came a few hours after Mike Pompeo offered a sharp rebuke to the Communist Party of China.

By doing so, he asked all countries to join the US to condemn China’s for its actions. He cited the party’s decision to pass a Hong Kong security law, the activities in the South China Sea, and human rights abuses in Xinjian.

Investors believe that these tensions will affect how the world operates. For example, the UK has been forced to terminate its contracts with Huawei, the Chinese giant company.

Brexit and the FTSE 100

The FTSE 100 index is also falling because of the rising risks of a no-deal Brexit. Yesterday, the fifth round of talks between the UK and the EU ended without a deal. The two sides blamed each other for the failure of breakthrough. While both sides want a free trade deal, the UK has remained adamant about regulations. It wants to set its own regulations while the EU wants to have a say in these negotiations.

The FTSE 100 is also falling because of recent corporate earnings. Some of the biggest companies in the FTSE 100 like Ocado and Rolls Royce have recently released weak earnings. Among the upcoming earnings are Land Securities, Schlumberger, Man, and Mapfire.

Top movers in the FTSE 100

Most companies in the FTSE 100 are in the red today. The biggest laggards are M&G, Melrose Industries, Scottish Mortgage Investment, Just Eat Takeaway, Evraz, and Rolls Royce. These shares have fallen by more than 3.9%. Meanwhile, the only companies in the green are Ferguson, Pennon, United Utilities, Tesco, Morrison, and National Grid.

FTSE 100 technical outlook

The FTSE 100 is trading at £6,110. On the daily chart, the price has moved below the important ascending trend line that is shown in red. The price has also moved below the 100-day and 50-day exponential moving average. It is also a few points above the important support at £6,000. Therefore, it seems like the bears have taken control, which means that the downward trend will continue. But they will need to move below £6,000 to stamp their authority.

On the other hand, a move to £6,240 will invalidate this trend. This price is along the 50% Fibonacci retracement level.

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FTSE 100 forecast

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