FTSE 100 trades lower by midday but off the daily lows as investor’s worries rise after Chinese administration planning to impose a new security low on Hong Kong. The new law will ban treason, secession, sedition and subversion of the central government in China. The move might spark a new round of pro-democracy protests and a stand-off that we saw last year.
Yesterday the US Senate passed a bill that could potentially ban some Chinese companies from listing on American stock exchanges such as Baidu and Alibaba. Retaliation from China can’t be ruled out that will further escalate the tension between the two superpowers.
On the data front, the United Kingdom Retail Sales came in at -18.1% below the expectations of -16% in April. The Retail Sales excluding Fuel came in at -15.2% also below the forecasts of -15%. I expect now that the Bank of England will increase its bond purchases at next month’s meeting. The UK two-year Gilt yield fell to a new record low of -7 basis points.
Lloyds Banking is 0.23% at 28.46, HSBC is -3.89% at 383.35, Vodafone is 0.54% at 129.49, and BP is 1.27% lower at 307.95.
FTSE 100 is 0.42% lower at 5,990 as the index breaks to the downside of the recent consolidation phase. FTSE 100 technical outlook is bearish for the long term despite the recent rally. On the short term, the momentum is still positive as long as the index trades above the 50-day moving average.
On the downside, immediate support for the FTSE 100 stands at 5,888 the daily low. If the index breaks lower, the next support is at 5,802 the low from May 18. More support for the FTSE would be met at 5,685 the 50-day moving average.
On the flipside, first resistance for the FTSE 100 index stands at 6,015 the daily top. The next resistance for the index is at 6,090, the high from yesterday’s trading session. If the FTSE 100 index breaks above 6,090 the next resistance will be met at 6,144 the high from April 30.