FTSE 100 Drops 6%, Ignores Chancellor’s £330bn Coronavirus Plan

FTSE 100 Drops 6%, Ignores Chancellor’s £330bn Coronavirus Plan

  • Chancellor Sunak unveils £330 billion stimulus plan to support businesses
  • “We must act like any wartime government,” warns PM Johnson
  • FTSE 100 approaching the key multi-decade support near 4,800 mark

The UK’s FTSE 100 is currently trading around 5% lower in London despite the massive £330 billion stimulus package unveiled by Chancellor Sunak yesterday.

Fundamental analysis: Government fails to calm investors

UK Chancellor Rishi Sunak promised yesterday to do ‘whatever it takes’ to support the businesses from collapsing amid the coronavirus-fueled crisis. Prime Minister Johnson echoed the same sentiment.

“We must act like any wartime government and do whatever it takes to support our economy,” said Johnson.

A £330 billion stimulus package is aimed at supporting businesses. The plan includes “business rates holiday to all businesses in the retail and hospitality sector for 12 months”, as well as cash considerations to help them survive in the short-term.

“This is not a time for ideology or orthodoxy. This is a time to be bold. A time for courage,” said Sunak.

As a result, FTSE 100 rallied 2.79% yesterday on the back of the massive stimulus package. However, the rebound was short lived as the index trades in a negative territory today once again.

“The damage to the corporate world from the COVID-19 outbreak is beginning to be laid out via a host of warnings to the stock market this morning. Along with airlines and travel, hospitality will be among the first hit,” said Ed Monk, associate director from Fidelity Personal Investing’s share dealing service.

The same market sentiment is also present across Europe, as all major stock indexes trade in red today.

In the meantime, the death toll in the UK has risen to 71 with 1,950 persons infected.

Technical analysis: Approaching the key support

Following a failed attempt to recover a portion of losses yesterday, FTSE 100 price has dipped lower once again today. The price action is now approaching the crucial short to mid term support at 4,800.

FTSE 100 weekly chart (TradingView)

This level consists of the horizontal support, which capped index’s losses on multiple occasions in the past decade, as well as the Fibonacci extension. A break of this level would pave the way for a deeper pullback to 4,000.

On the upside, the 5,500 handle is a key level for the bulls to get to. In case of a bigger recovery, we can see the FTSE 100 going back to 6,000 on the improved risk sentiment.

Summary

FTSE 100 has been trading lower again today, despite the short-lived gains it made yesterday. The Government’s massive £330 billion stimulus package has obviously failed to calm investors’ fears as the number of deaths and infections rises in the UK.

By Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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