The FTSE 250 erased gains made on Monday and Tuesday as the rail-workers strike continued. The small-cap index slipped by more than 1.30% and is trading at £18,687, which is significantly lower than the 2021 high of almost £23,000. The blue-chip FTSE 100 has slumped by more than 1.17%, while the FTSE All-Share index fell by more than 1%.
UK small-cap stocks nosedive
The FTSE 250 index slumped as investors reacted to the latest UK consumer inflation data. According to the Office of National Statistics, the country’s inflation surged to 9.1% in May as the cost of food and energy continued rising. The only positive sign was that inflation excluding food and energy declined from 6.2% to 5.9%.
The index is also crashing as investors focus on the ongoing rail-workers strike. The workers are protesting the relatively low wages and poor working conditions. As a result, analysts expect many domestic companies in the FTSE 250 index will be affected.
Meanwhile, other global indices have made a strong pullback, with the Dow Jones futures slipping by 427 points. S&P 500 futures have also crashed by 60.5 points, while the tech-heavy Nasdaq 100 index futures fell by more than 1%.
Most companies in the FTSE 250 index are in the red. The most notable laggards are companies like Royal Mail, Tullow Oil, Aston Martin Lagonda, IWG, TUI, Carnival, and Johnson Matthey. All these shares have slipped by more than 3%. According to Hargreaves Lansdown, the most active FTSE 250 stocks are iTV, Centamin, and Quilter.
FTSE 250 forecast
The daily chart shows that the FTSE 250 index has been in a strong bearish trend. It is trading at £18,680, which is the lowest it has been since March this year. It has managed to move below the important support at £19,279, which was the lowest level on May 10th. It has also dropped below the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has been falling as well.
Therefore, the path of the least resistance for the index is lower. The next key support level to watch will be at £18,400. A move above the resistance point at £18,946 will invalidate the bearish view.
