FTSE 100 drops 3% as BoE’s Haldane warns of “very ugly” H1 2020

on Apr 21, 2020
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  • FTSE 100 joins other major European indexes in moving lower
  • BoE’s Haldane fears that people may be reluctant to spend after restrictions are lifted
  • The blue-chip index lost nearly 3% today on the worsening risk sentiment

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FTSE 100 closed today’s session 2.96% lower as the European equities all registered sharp losses. In the meantime, the Bank of England’s (BoE) Andy Haldane has warned of a “very ugly” first half of the year.

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Fundamental analysis: Death toll jumps, Haldane issues a warning

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The UK reported 828 new deaths from coronavirus today, a significant jump compared to yesterday’s figures of 449. In total 17,337 patients have died in hospital after testing positive for coronavirus in the UK, authorities said. 

Elsewhere, the Chief Economist of the Bank of England (BoE) spoke today about the economy’s recovery after the coronavirus restrictions are lifted. Here are some key takeaways from his appearance in a podcast for the Institute for Government think tank. 

  • “Q2 is likely to bring a very much sharper contraction, seen across the world.”
  • “There are real limits to what public policy can do to offset economic effects of coronavirus containment.”
  • “People might be reluctant to spend too vigorously or go out and socialise immediately after coronavirus restrictions are relaxed.”
  • “Judgments on inflation are two-sided later this year.”
  • “Talk of monetary financing, helicopter drop is misplaced, risks of the BoE losing control are hugely overblown.”
  • “The gilt market should have confidence this is not monetary financing.”
  • “This is simply fiscal and monetary policy coordinating to deal with a whopper of a crisis.”

Even after restrictions are lifted, Haldane fears that people may be reluctant to spend. Last week, the country’s independent budget watchdog – The Office for Budget Responsibility (OBR) – said that the national economy may contract as much as 35% in the second quarter. 

As a result of the deteriorating risk sentiment, global equities trade mostly in red. Moreover, yesterday’s historic crude oil price crash is weighing on oil giants, such as BP or Shell. 

Technical analysis: FTSE 100 turns south

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FTSE 100 closed the day 2.96% in red as the global equities feel significant selling pressure amid the crude oil price crash. The buyers have failed to extend a series of the higher highs and higher lows today as the blue-chip index threatens to continue moving lower in the coming days.

FTSE 100 weekly chart (TradingView)

Levels around 5,400 host imminent intra-weekly support should the pull back extend tomorrow as well. The March low, which is also a multi-month low for the index, around 4,900 is a major target for the sellers, while the support zone between 4,700 and 4,800 remains absolutely crucial for the buyers to defend. 

Summary 

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FTSE 100 has closed almost 3% lower today to join other major European indexes in a deeper pull back after a historic crash in the crude oil prices yesterday. 

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