The FTSE 100 monthly chart is signalling that the FTSE 100 could move lower again as the market fails to hold onto gains above the key 6000 support.
The UK index is trading in contrast to its U.S. counterparts, with the Nasdaq and S&P500 seeing new all-time highs, whilst the FTSE 100 trades at a 20% discount to its February levels. Data released on Friday showed British business confidence has improved but remains well below its usual standards, whilst there are fears that employers could trigger further job losses.
Although the U.S. indices are powering higher, data has pointed to the fact that the valuations are being driven by a handful of big tech companies that largely escaped the economic downturn. The FTSE has little competition in that arena and earnings reports are understandably subdued. Last week was the turn of Rolls Royce to release a half-year update and this resulted in a record loss for the company, which relies on earnings from flying hours in a world where flights have been grounded across the world. I also wrote that supermarkets such as Tesco could face a slower second half after lockdowns were lifted, which will reduce the online sales boom, whilst the government’s “eat out to help out” scheme will also reduce sales. A report last week also saw a £22bn hit to the U.K. from tourism.
Monday is a bank holiday in the U.K. and the calendar is light this week with no big company earnings or economic releases. The FTSE will likely take its cue from global investor sentiment and Friday sees the return of U.S. Non-Farm Payrolls data. Moving forward, the FTSE 100 is struggling under a key support level and needs to see a catalyst for further gains. If the investment appetite sours across the Atlantic, another leg lower in the FTSE could look to retest the March lows.
FTSE 100 Technical Outlook
The 6000 level was a key support for the FTSE 100 in late-2015 to 2016. The index closed at 5800 on a monthly basis during the virus panic-selling, yet managed to close back above 6000 in May and June. The failure to hold these gains is threatening another push lower, with the March lows around 4760 being the support. The FTSE will need to see renewed strength above 6000 to remove the bearish outlook.