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FTSE 100: Worst-performing index in Europe as Rolls Royce disappoints

The FTSE 100 index is wavering today as traders reflect on a slew of corporate updates and a speech by Rishi Sunak. The index is unchanged and is trading at £6,157. This compares with the 1.23% gain of the DAX index and the 0.32% gain in the CAC 40 index. Other top indices in Europe like AEX and Stoxx 50 are up by more than 0.50%.

FTSE 100 reacts to Rolls Royce earnings

The biggest mover in the FTSE 100 is Rolls Royce, whose share price has dropped by more than 7%. This happened after the company delivered its first quarter trading update that disappointed. Key highlights in the report was the underperformance of the power business and the civil aviation segment. The latter segment suffered after wide-body flight hours fell by more than 50% in the first half of the year. This decline was expected considering that trans-continent travel has been halted.

Another highlight was that the company managed to reduce its costs. It cut about £300 million of costs in the first half of the year. It also expects to reduce costs by about £600 million this year. Also, it said that it was taking a charge of £1.45 billion in the next few years because of hedging problems. It now has a pro-forma liquidity of more than £8 billion.

You can read our update on Rolls Royce share price here.

Other companies report weak earnings

In an update earlier this week, we wrote that Whitbread share pricehad wavered after it reported a weak quarter. It is not alone. Earlier today, PageGroup and Robert Walters, two of the leading UK recruiters said that their business had suffered huge losses. That is because most businesses had decided to halt hiring as more people remained at home.

PageGroup reported a gross profit of £118 million, down by 48%. Robert Walters also reported a 54% drop in gross profits. Still, the two firms confirmed that business activity had started to improve.

However, it was not all gloom in the FTSE 100 today. Caledonia Mining shares rose after the firm reported a great quarter. Similarly, Persommon said that it was re-evaluating its dividend policy after strong sales. It said that its forward sales of new homes were 15% ahead of last year. The firm had decided to cancel its dividend as the virus continued.

Other top movers in FTSE 100

Apart from Rolls Royce share price, other weak performers in the FTSE 100 are National Grid, British American Tobacco, Compass Group, HSBC Holdings, and SSE. On the other hand, the best performers are Persimmon, Next, GVC Holdings, and Taylor Wimpey.

FTSE 100 technical outlook

The FTSE 10 has been moving sideways in the past few days. The index is trading at £6,156, which is along the 50-day EMA and slightly below the 100-day EMA. The price is also along the ascending trend line that is shown in pink. The price also seems to be consolidating at the lower side as is shown in the rectangle below. It is also slightly below the 50% Fibonacci retracement level. Therefore, there is a possibility that the price will break out lower.

However, a break above the upper side of the rectangle at £6334 will invalidate the bearish thesis. It will mean that there are more bulls in the market who will be keen to push the price higher.

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