FTSE 100 retreat after the International Monetary Fund said that the global economy would suffer the worst recession in 2020 since the Great Depression, with global GDP set to contract by 3%. The Office for Budget Responsibility said that UK economy could contract by 35% in the Q2 of this year. Yesterday, Britain’s finance minister warned that the UK economy could shrink by 30% in the second quarter amid the coronavirus lockdown.
I expect that even lockdown measures are eased the economic activity in the UK will remain subdued until at least the end of the second quarter. The continuous uncertainty, weak demand, and interruption of supply chains would have a massive impact on companies earnings while the relief package is only restoring the short term liquidity problems.
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FTSE 100 Analysis
FTSE 100 is 1.72% lower at 5691 as the rebound from the March lows stalled below the 5900 mark. The technical outlook for the FTSE 100 index remains bearish, while the rejection at 5900 might attract a new wave of sellers. What can cancel the negative momentum is only a break above the 50-day moving average at 6318.
On the downside, immediate support for the FTSE index stands at 5,684 the daily low. If the index breaks lower, the next support area is at 5,594 the low from April 8. More support for the index would be met at 5,412 the low from April 6th trading session.
On the other hand, initial resistance for FTSE 100 stands at 5,791 the daily high. The next hurdle for the index is at 5,883, the high from yesterday’s trading session. If the FTSE index breaks above 5,883 the next supply zone will be met at 6,078 the high from March 11.
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