FTSE 100
The FTSE 100 index is in the red today as investors react to the warning by the Fed about the rising risks of the economy. The index is down by 0.61% and is trading at £6,072. Other indices in Europe are also in the red, with the DAX index, CAC 40, and Stoxx 50 falling by 0.75%, 0.85%, and 0.90%, respectively. It also joins Asian indices like the Nikkei 225 and Hang Seng that are equally in the red.
The FTSE 100 index is reacting to minutes by the Fed. In these minutes, the reserve bank warned that the American economy was at risk unless the coronavirus pandemic is tamed. At the same time, the bank urged congress to pass a new stimulus bill in a bid to save the economy. Ironically, it warned that the public debt, which has grown by more than $3 trillion, was getting out of hand.
Also, the FTSE 100 and other indices are falling because of valuations. As we wrote yesterday, Apple became the first company to cross a $2 trillion valuation. And, in the coming month, other companies like Microsoft and Amazon will likely join it in that club. Therefore, investors are curious about whether the bull run that pushed these stocks there will remain.
Most companies in the FTSE 100 are in the red today. Evraz, the giant steel company, is the worst-performing stock, down by more than 4%. M&G, Standard Life Aberdeen, IAG, and Mondi are also leading laggards. On the other hand, InterContinental Hotels, Ocado, SSE Group, Segro, and British Land are the best-performing stocks in the FTSE 100.
The daily chart shows that the FTSE 100 index has been moving sideways in the past few weeks. The price is between the 50% and 38.2% Fibonacci retracement level. It is also slightly below the 50-day and 100-day exponential moving averages while its volatility, as measured by the Average True Range (ATR) has fallen substantially.
Therefore, while the outlook for the FTSE 100 is neutral, I suspect that the low volatility is a calm before the storm. As such, I will not be surprised if it breaks out sharply in the near term.