FTSE 100 started the week on positive foot after the sharp two-day correction the previous week. Chinese stocks tumbled in Asian trading session with the Shanghai composite giving up 7.72% at 2746. Coronavirus outbreak weighs on global growth as the industrial production and transportation in China halted. The situation in Asian markets might have been worse but the PBOC intervention provided some support. The central bank of China cut the seven and 14 days repo rates by 10 basis points and injected $173.8 billion of liquidity into the markets through reverse repos.
The UK Manufacturing PMI came in at 50, topping the expectations of 49.8 in January.
Earlier today the EU chief negotiator, Michel Barnier, announced the EU’s post-Brexit negotiating mandate proposal. Meanwhile the British pound is under pressure on renewed hard Brexit fears as PM Johnson would suggest tough terms for European Union talks.
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The PBOC liquidity injection gave breath to risky assets and investors go bottom fishing after the two-day sharp correction last week. The massive losses the previous week cancelled the bullish momentum formed since the general election in December. On Friday the FTSE broke below the 100-day moving average and the short term outlook is bearish.
On the upside, immediate resistance for the FTSE stands at 7,325 the daily high. Next resistance for FTSE will be met at 7365 the 200-day moving average. The next supply zone for FTSE 100 will be met at 7400 the high from January 31st.
On the flip side, initial support for the FTSE index stands at 7,285 the daily low. Next support for the index is Friday’s low at 7275. If FTSE 100 index breaks below, the next support zone will be met at 7136 the low from December 6th.