FTSE 100
Barclays share price declined by more than 3%, becoming the worst-performing bank in the FTSE 100. Royal Bank of Scotland, HSBC, and Lloyds share prices dropped by 2.89%, 2.31%, and 2.36% respectively. At the same time, the FTSE dropped by more than 1.30%, becoming one of the worst-performing indices in Europe.
Shares in Barclays have been on an upward trend after settling at 72 pence in March. Since then, the shares have ticked upwards and are now trading at 128 pence. That is a 77% increase during this time. Other banks like Lloyds and HSBC have also been in an upward trend, mostly because of the overall stock market performance. In addition, with the global economy recovering, there is are signs that the overall situation will not be as bad as most people were expecting.
The biggest challenge for Barclays share price is Brexit. Just last week, the two sides (UK and EU) ended the fourth round of talks without a deal. This raises the probability of a no-deal Brexit if Boris Johnson does not request an extension of the transition later this month. All indications so far are that the prime minister will not request for this extension.
This has significant risks for Barclays. Early this month, the Bank of England warned banks to prepare for such a scenario. In an interview with Sky News, Andrew Bailey said:
“It is fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face. In performing that role, the governor meets the leadership of UK banks on a very regular basis.”
A good thing that Barclays has is its Fixed Income Commodities and Currencies (FICC) business. This is unlike Lloyds bank, which focuses mostly on consumer and business lending. In the most recent quarter, Barclays income rose by 20% driven by the high-margin Corporate and Investment Bank (CIB) division. Its FICC revenue rose by 106% to £1.86 billion.
There is evidence that the division will continue to improve. For example, in a recent statement, Deutsche Bank CEO said that his bank’s FICC was accelerating the momentum.
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On the daily chart, we see that Barclays share price hit brakes when it reached the 50% Fibonacci retracement level of 134 pence yesterday. The price is still above the 50-day and 100-day exponential moving averages. This movement implies that Barclays share price may continue having this pullback as bears attempt to test the 38.2% Fibonacci retracement level of 118 pence.
On the flip side, a move above the yesterday’s high of 134 will invalidate this trend. If it crosses, the price will continue rallying as bulls attempt to test the 61.8% retracement level at almost 150 pence.