FTSE analysis: Banks and luxury stocks weigh ahead of key data

FTSE analysis: Why has UK 100 struggled?
Top-tier Chinese, UK and US data could ignite momentum
FTSE technical analysis suggests bulls still clinging on

After a slightly firmer start, the FTSE turned lower in a relatively quiet trade. A sell-off in luxury and bank stocks meant that the UK index would spend at least the first part of Monday’s session in the red. There’s not much in the way of US data in the afternoon, with banks there closed in observance of Martin Luther King. We will, however, have some important macro data from the UK, as well as China and the US, to look forward to later this week, which could impact the FTSE outlook, following its subdued start to the new year.

FTSE analysis: Why has UK 100 struggled?

The FTSE has been hit from multiple sources. Banks have provided one of the biggest drags on the index. Concerns over reduce demand for loans owing to very high interest rates and has held back shares of UK lenders. Meanwhile, there are concerns about demand in the luxury goods industry. Investors fear that margins for luxury goods companies could be squeezed by weaker demand, especially from China where the local stock market has been the weakest among the major economies last year. One of the worst-hit stocks has been Burberry, whose shares have fallen about 10% since it delivered a profit warning on Friday. Let’s see how other luxury companies have performed, with results from the likes of Richemont due out on Wednesday.

On a more macro level, the Bank of England has remained in the hawkish camp, owing to the relatively higher inflation in the UK than other major economies. This is an additional reason why the FTSE has struggled.

Looking ahead to the rest of the week

Thankfully, we will have some important UK wages, inflation and retail sales data for December coming up this week, which should provide more clarity on potential interest rate cuts from the Bank of England. We will also awaiting key industrial and GDP data from China on Wednesday, which could help alleviate the downward pressure on Chinese stocks, and in turn support some of the China-focused stocks listed in London. Meanwhile, this week’s US data highlights include retail sales and consumer confidence.

FTSE analysis: technical levels to watch

The FTSE’s side-ways price action in recent weeks means that the levels we have been watching from before, remain pretty much the same. The area around 7550 to 7580 is key support. Here, the 200-day average and a bullish trend line converge with previous horizontal support and resistance. For as long as this zone is defended by the bulls, the trend would remain bullish. Short-term resistance is seen around 7640-7650 area, where Friday’s recovery stalled. Here, the 21-day exponential average also comes into play. The bulls would therefore like to see a close above 7640/50 area in the next couple of days to start gaining back some control.

Source: TradingView.com

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.