FTSE 100 turns lower as the UK intensifies restrictions

FTSE 100 turns lower as the UK intensifies restrictions
Written by:
Michael Harris
22nd September, 15:30
  • FTSE 100 index swing to a loss after the UK government intensified lockdown restrictions
  • The UK is considering a short-term national lockdown in an attempt to curb the number of infections
  • A break below 5779, today’s low, would result in the new 4-month low for the blue-chip index

FTSE 100 index is trading around 3% lower this week after the UK government intensified lockdown restrictions in the country as the number of coronavirus cases increases.

Fundamental analysis: Number of infections rise

The number of daily cases hit a four-month high of 4,422 on Saturday and data suggest that hospital admissions might hit the mid-March figures by the end of September. In order to prevent the second wave, Prime Minister Boris Johnson is looking to replace the “rule of six” with stricter daily life measures. 

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Johnson said he may have to “intensify” restrictions that would serve as a temporary “circuit break” to prevent the Covid-19 resurgence and keep the country from going into a second lockdown.

He plans to spend the next weekend in Downing Street and discuss additional measures including closing pubs and restaurants or enforcing 10 pm curfews and a nationwide ban on the household socialising. An announcement about new measures might be expected as early as tomorrow. 

Johnson earlier said that a new lockdown would result in an economic disaster for the country. On Friday, he said

“I don’t want to go into a second national lockdown at all. That’s the last thing anybody wants. I don’t want to go into bigger lockdown measures at all. We want to keep schools open.”

Also, Matt Hancock, the Health Secretary said the UK is considering a short-term national lockdown in an attempt to curb the number of infections before the pandemic becomes uncontrollable. 

Hancock said he was “doing everything we can to prepare, and are absolutely prepared to take whatever action is necessary”.

Some regions of England are already in local lockdowns. The country has imposed bans on socialising outside of households in the North West, the Midlands and West Yorkshire on Tuesday and has introduced curfew on pubs and restaurants. Right now, around 13 million UK citizens are in local lockdown.

Technical analysis: Revisiting May lows

The FTSE index is trading around 3% lower this week to swing to a negative territory for the current month of September. This was expected after a bearish close in August, which paved the way for a deeper pullback. 

FTSE 100 index chart (TradingView)

Today, the price action hit 5779 as it tests September lows. A break below this figure would result in the new 4-month low for the blue-chip index. A more bearish scenario sees FTSE price breaking below 5700, which offers key short-term support.

Summary

Boris Johnson has stepped up lockdown measures in the UK in the wake of the rising number of new coronavirus cases in a bid to prevent the country from going into a second lockdown. As a result, the FTSE index turned lower to trade negative on the month. 

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