The FTSE 100 index crashed by more than 0.40% as Evergrande and US default risks rose. The Footsie index is trading at £7,030, which is about 1.95% below the highest level last week. Elsewhere, the DAX index, CAC 40, and the Hang Seng also declined substantially.
Why is the FTSE 100 falling?
The FTSE 100 index declined as investors reflected on the latest news from China, where Evergrande shares were halted. According to Reuters, the company was in talks by Hopson will acquire the company’s property management unit. The deal will be valued at more than $5.1 billion. This will be a substantial deal for Hopson, a company that is valued at more than $7.1 billion.
The deal comes a few days after Evergrande announced that it will sell a stake in a bank for about $1.5 billion. These asset sales mean that the company will be able to pay some of its upcoming maturities.
The top movers in the FTSE 100 index were companies like IAG, the parent company of British Airways, Rolls-Royce Holdings, Hikma Pharmaceuticals, Pershing Square, JD Sports, and Tesco. Aviation stocks have risen as investors price in a swift recovery of the sector.
On the other hand, the worst performers in the FTSE 100 were companies like BT Group, Morrisons, Prudential, HSBC, Lloyds Bank, and Compass Group.
The top FTSE 100 shares to watch this week are retailers like Tesco, Morrisons, and Sainsbury’s. Tesco will publish its half-year results on Wednesday and analysts expect that it will announce more shareholder returns. Morrisons shares tumbled after the auction price came in lower than expected. Sainsbury’s, on the other hand, rose as investors priced a bid for the company.
FTSE 100 index forecast
The four-hour chart shows that the FTSE 100 index has been under pressure in the past few weeks. The index has formed a triple-top pattern at £7,130. In price action analysis, this pattern is usually a bearish sign. The neckline of the pattern is at the £7,000 level.
Therefore, the path of the least resistance for the index is to the downside, with the next key level to watch being at £6,800. On the flip side, a move above £7,100 will invalidate the bearish view.