FTSE 100 smacks lower as China considers 4 options to punish the UK

The FTSE 100 declined by more than 1.10%, becoming the worst-performing index in Europe today. Other indices in Europe, including the DAX index, Stoxx 50, and CAC 40 are down by more than 0.50% as at 08.25 GMT.

FTSE 100 drops as China threatens to strike back

The UK is going through a difficult period as the country continues its battle against covid-19. Its economy is declining and the rate of unemployment is expected to jump in the next few months. The country is also dealing with the fallout surrounding Brexit. Its negotiators have failed to reach any meaningful agreements on the future relationship.

And now, the country is caught between the trade disputes between the United States and China. Two weeks ago, the country, under intense pressure from the US, decided to throw Huawei under the bus. It also ordered telecommunication companies to work to remove the company’s products in their infrastructure.

In a statement today, the Chinese foreign ministry warned that the country would respond to these measures. This followed a sharp rebuke by the Global Times, which explored the cards that China would play with the UK.

One action, according to the paper, is to ask Chinese companies to scale down their investments in the UK. This move would hurt the UK economy because China is the country’s biggest trading partner.

Also, the paper suggested that China could target specific companies that have invested in the country. This includes companies like HSBC, that are expanding in China. Another option is for the country to expand the influence of the yuan in Europe. The paper noted:

“The UK should not forget that China’s economy has gained significant strength and the UK’s available options are fewer than China’s in a showdown over not just technology but also the Hong Kong issue.”

Meanwhile, the UK is also warning about its relationship with China. In a statement, Dominic Raab said that the relationship between the two countries will never be the same again because of the virus and the human right abuses in Xinjian province.

Top Movers in the FTSE 100

Most companies in the FTSE 100 are in the red today. The worst-performing is IAG, the parent company of the British Airways, whose shares are down by 3.29%. It is followed by Standard Life Aberdeen, whose stock is down by 2.90%. Other notable losers are Melrose Industries, Ocado, Intercontinental Hotels and BP.

Meanwhile, the biggest gainer in the FTSE 100 is Taylor Wimpey, whose share price is up by more than 1.16%. AstraZeneca share price has risen by more than 1.10% after the company moved to stage 3 in its vaccine development. Other top movers are Antofagasta, BAE Systems, and Segro among others.

FTSE 100 technical outlook

The FTSE 100 is trading at £6,273, which is within the same range it was in the past three days. The index is trading above the 100-day and 50-day exponential moving averages. It is also along the 50% Fibonacci retracement level. Also, its volatility, as measured by the Average True Range (ATR) has moved to its lowest level since February 20. In most cases, this is usually a calm before the storm, which means that the price is likely to break out higher.

On the flip side, a move below 6,000 will invalidate the upward trend. This is an important psychological level that is also the lowest level on July 10.

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