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FTSE 250 Index Falls Again as Macro Worries Dampen Mood

The FTSE 250 index declined by 0.47% yesterday in part because of the overall weakness in European equities. With FTSE 100 index futures down by 0.40%, there is a possibility that the smaller index will fall at the start of the day.

There are three main catalysts that will push the FTSE 250 lower today. First, even with a Covid vaccine, investors are still concerned about the pace of distribution and the fact that the number of cases in the UK and the US is getting out of hand. This has an impact because many companies in the index have a lot of business in the UK, US, and other European countries.

Second, economic data both in the United States and the UK has been relatively weak. For example, yesterday, data from the United States showed that the headline retail sales rose by just 0.3% in October while core sales rose by just 0.2%.

And today, data from the UK show that the country is still battling low rate of inflation, with the headline CPI rising by 0.7%. Further data showed that UK car registrations dropped by 57.0% in October after rising by 276% in the previous month.

The FTSE 250 will also fall because of the strong sterling. The pound has gained 0.20% against the US dollar today, and as I wrote earlier, the trend seems supportive of the currency. A stronger pound tends to have a negative impact on UK companies, especially those that sell their items abroad.

FTSE 250 technical outlook

The FTSE 250 index has been on a relatively strong trend recently. Yesterday, it ended the day at £19,516. On the daily chart, the price is slightly below the 78.6% Fibonacci retracement level. It is also slightly above the 50-day and 25-day moving averages. Most importantly, it is above the important support at £18,463. Therefore, even with the today’s decline, the overall trend remains bullish so long as the price is above the psychological level of £19,000.

FTSE 250 chart