FTSE 100 Index Pulls Back as Rolls Royce Shares Suffer Harsh Reversal
The FTSE 100 index is under pressure after the weak UK jobs report. The blue-chip UK index is down by 0.25%, which is in the same range as other European indices like the DAX index and CAC 40.
Earlier today, data from the Office of National Statistics (ONS) showed that the UK unemployment rose to 4.5% in August as companies continued to downsize. The number of jobs added and wages continued to fall.
And analysts believe that the situation will keep getting worse as the government winds down the furlough program. Worse, with the number of Covid-19 cases rising, there is a possibility that the situation will get worse.
However, the FTSE 100 index has held relatively stronger because of hopes that the UK and the EU will reach a Brexit agreement. With the 15th deadline fast-approaching, analysts believe that a deal, albeit a narrow one will be reached by the two sides. Such a deal would be a good thing for most companies in the FTSE 100.
Leading the losses is Rolls Royce, the giant engine-manufacturer, is the worst-performing company in the index. The shares are down by more than 4%, which is a harsh reversal after they doubled in the past week. Rolls Royce share price is trading at 186p.
IAG, the parent of British Airways, is falling a day after the company announced the resignation of the CEO. The stock is falling mostly because of the rising Covid-19 cases in Europe. Meanwhile, Lloyds share price is down by 2% as investors wait for bank earnings from the United States. The market is also anticipating negative interest rates from the UK. On the other hand, the best-performing companies in the index are SSE, Experian, and Morrison Supermarket.
FTSE 100 index technical outlook
The daily chart below shows that the FTSE 100 index has been in a slow downward trend since June. During the decline, the index has formed a narrow downward channel that is shown in green. The current price has found some resistance at the upper side of this channel. The price is also slightly above the 38.2% Fibonacci retracement level.
Therefore, I suspect that the price will move lower as bulls aim for the lower side of the descending channel at £5,600. To do this, they will need to move below the 38.2% retracement level at £5,885.