FTSE 100 Index Rallies As Rolls Royce Scraps Dividends And Halts Target

FTSE 100 futures rose by more than 3% as the number of Coronavirus cases started to flatten in most countries. The number of new infections has been dropping in Spain, Italy, and more European countries. The pace of growth is also expected to fall in the United States. The FTSE rose at a time when Boris Johnson, the UK prime minister has been hospitalized with the disease.

Meanwhile, the situation in corporate UK continues to struggle. Over the weekend, Rolls Royce, the industrial giant announced that it was suspending its dividends. In announcing the new measure, the company is joining other UK companies like Barclays, HSBC, and Lloyds Bank, who have also slashed their dividends.

Rolls Royce has been hit hard since most airlines are currently in trouble. As a result, Airbus and Boeing, its biggest customers, have announced that they will cut production. The company has also had some supply challenges since business in Europe has been affected.

In addition to slashing its dividend, Rolls Royce suspended its target of making more than 1 billion in free cash flow this year. The target was made in 2017.

Other companies in Europe are also facing the same challenges. Last week, we reported that the three big automakers in Germany, were under pressure to suspend their dividends.

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FTSE 100 Technical Overview

The FTSE 100 index rose to an intraday high of £5,600. On the four-hour chart, the price is slightly above the 23.6% Fibonacci Retracement level and slightly above the 50-period moving averages. It is still lower than the 100-period moving average. Still, the pair has been moving in a slight downward trend. I expect the index to continue rising today, albeit some of the current gains could be erased.

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