The FTSE 100 index is finally correcting after surging for eight consecutive days. The benchmark index representing the FTSE 100 companies surged due to the rise in the stocks of oil companies and gold miners. As crude oil and gold both turned negative today, shares of the relevant companies also took a hit.
On Wednesday, most of the financial markets are showing a negative price action. The FTSE 100 index lost 30 points during the first 4 hours of trading. The benchmark index was down 0.37% till press time. Gold price also tumbled and was trading at $1974 after failing to secure any strength above $2000.
According to the recently released March 2023 inflation data, UK inflation rose by 10.1% during the month. Even though it was less than the previous month’s figure of 10.4% but it was still above the market expectations of 9.8%. This meant the highest YoY inflation among the Western European countries.
FTSE 100 index has reacted negatively to these signs of strong inflation. As per the details, food prices jumped by 19.1% in March 2023, which was the highest increase since 1977. Consequently, analysts expect the UK inflation to remain elevated for a much longer duration than initially expected.
Technical analysis of the FTSE 100 Index chart shows a massive surge since its March lows. The index is currently almost 10% up from the lows. Nevertheless, the sticky inflating in the US and UK still keep pointing towards a recession in the latter part of this year. Furthermore, the index is currently retesting a very major resistance on its daily chart, which might result in a pullback.
Due to these fundamental and technical reasons, my FTSE 100 Index forecast is not bullish for the coming months. It will be tough for UK businesses to thrive in high inflation with increased interest rates.
I’ll keep sharing my updated price outlook on FTSE 100 Index and other UK shares in my free Telegram group, which you’re welcome to join.
This post was last modified on Apr 19, 2023, 12:36 BST 12:36