- Summary:
- The FTSE 100 index tested a key support level as travel and mining stocks declined because of the rising number of covid-19 cases in Europe
The FTSE 100 index is down by 0.25% as investors react to the second-wave spreading in European countries. It is trading at £5845, which is substantially lower than the intraday low of £5827.
Travel stocks tumble
Travel-associated stocks are the worst-performers in the FTSE 100 index today as traders remain pessimistic about the overall outlook as the number of coronavirus cases soar.
Rolls Royce share price are down by more than 4% because investors believe that it will take longer for international travel to recover. This is simply because of the recent surge of coronavirus cases in Europe and other countries.
The company is greatly affected because the need for aeroplanes has tumbled as more airlines struggle. At the same time, as international travel remains under pressure, the need for airline servicing has declined. Rolls Royce share price is trading at 232.60p.
Other hospitality companies like British Airways owner, IAG, is the second-worst performing stock. Its shares are down by more than 2.95%. Similarly, Intercontinental Hotels and Whitbread shares have also tumbled.
Commodity constituents of the FTSE 100 have also declined. Royal Dutch Shell, Anglo American and Glencore shares have dropped. This is because investors believe that demand for commodities like crude oil and copper will drop as another round of lockdowns drop.
On the other hand, the best-performing stocks in the FTSE are Pearson, Hikma Pharmaceuticals, AstraZeneca, and Polymetal.
Still, while the FTSE 100 index has dropped, it has done better than other European indices like the DAX index, CAC 40, and Stoxx 50, all of which have dropped by more than 1%. This is partly because of the fact that the pound has only dropped by 0.15% while the euro has fallen by 0.30%.
FTSE 100 technical outlook
Turning to the daily chart, we see that the FTSE 100 has been forming a descending triangle pattern, with the support being at £5787 level. Today, the price tested this support level, which also explains why the index has performed relatively better than the DAX and CAC 40.
It has also moved below the 38.2% Fibonacci retracement level. Therefore, since this triangle is nearing its area of confluence, I suspect that a bearish breakout will soon happen. If it does, the next support level will be at £5,600.
FTSE technical chart
