- Summary:
- The focus today will be on FTSE 100 companies with exposure on Brexit including Rolls Royce, Tesco, Meggitt, and Imperial Brands
The FTSE 100 index is set to open lower today as investors continue focusing on the ongoing Brexit impasse. The index, which tracks the biggest companies in the United Kingdom, is set to open at £6,515, which is slightly lower than yesterday’s high of £6,605. Similarly, the sterling has dropped by about 0.25% against the US dollar.
In the past few months, like other global indices, the FTSE 100 has been on an upward trend. From March this year, the index has soared by more than 36% in part because of the possibility of a covid vaccine. Another possible reason why the FTSE index has been rising is the optimism that the UK and EU will reach a Brexit deal.
The optimism about Brexit changed yesterday when chatter about the possibility of a no-deal Brexit emerged. In a statement, Michel Barnier, the chief EU negotiator said that while the two sides have made progress, he could not guarantee that they will reach a deal. In another report, citing sources, the Sun said that Boris Johnson was considering leaving the ongoing negotiations.
Today, we woke up to news that Johnson will head to Brussels, where he will have a discussion with Ursula von der Leyen, the bloc’s president. Economists hope that the two sides will reach an agreement, which will be a positive thing for the UK economy and the overall FTSE 100 companies.
FTSE companies to focus on today
There will be no major corporate events today. The only firm to watch will be Ashtead, a major equipment rental company, that will publish its interim results today. Another firm to watch will be Ferguson, which will release its trading statement. Other FTSE 100 companies to watch will be BP and Royal Dutch Shell, which will react to the overall lower crude oil prices.
Meanwhile, investors will also focus on FTSE companies with significant exposure to a no-Brexit deal. For example, Imperial Brands, the tobacco company, could see tariffs of as high as 70% if there’s no deal. Retailers like Tesco, Morrison, and Sainsbury could see supply disruptions and higher prices while aerospace companies like Rolls-Royce and Meggitt would also be affected.
FTSE 100 technical outlook
On the four-hour chart below, we see that the FTSE 100 index has been tilting downwards since yesterday, when it reached a high of £6,600. The index also formed an evening star pattern and is still above the 25-day and 50-day moving averages.
It is slightly above the important support of £6,487 while the average true range has been falling. While this is a signal of low volatility, it could be a sign of a calm before the storm, meaning that volatility will return.
FTSE index technical chart
