- Summary:
- FTSE 100 index drops in the premarket as Brighthouse files for bankruptcy. Analysts are fearing a wave of retail bankruptcies which can worsen UK recession.
FTSE 100 index CFDs lagged its European peers as the Coronavirus pandemic took toll on the economy. As of this writing, FTSE 100 futures are up by about 70 basis points. This is lower than the DAX index, CAC, and Stoxx Index, which have risen by more than 1%.
Investors are concerned about the impact the current lockdown will have on the vulnerable UK economy. Some big firms have already started to warn of bankruptcy. For example, BrightHouse, the giant rent-to-own group went into administration yesterday. The same is true with the Italian restaurant chain, Carluccio’s, which went out of business yesterday. The two companies employed more than 4,000 jobs directly.
Analysts are warning that more companies will not survive. For example, many retailers like Marks & Spencer and Asos were already in trouble before the crisis. Indeed, an analyst quoted by The Guardian predicted that four to five big retailers would fold this week. These companies are contending with high rent and operational costs at a time when no one is shopping.
In addition, the real estate sector, which relies heavily on bank lending has been halted. This could see many developers miss their debt obligations, which would then cause the banking sector to fail.
All this is happening a few days after Fitch downgraded UK debt. It is also happening at a time when Boris Johnson is sick and when the country is struggling to reach an agreement with the European Union.
Read our Best Trading Ideas for 2020.
FTSE 100 Technical Analysis
On the four-hour chart, we see that the FTSE 100 index found some support at around the £4,783 level. We also see that there is some indecision in the market about where the index could head. We also see that the index is in a corrective wave of the Elliot Wave pattern. Therefore, I expect the index to decline slightly and then rebound. The key level to watch will be the yesterday’s low of £5,372 and the yesterday’s high of £5,831.