FTSE Slumps On Coronavirus Fears & Upbeat Wage Data

The FTSE is on track for its worst day in 7 weeks as traders fret over the outbreak of coronavirus in China & following upbeat UK wage data


Risk aversion is dominating early trade on Tuesday, with losses in Asia spilling over into Europe. The FTSE is on track for its worst day in 7 weeks as traders fret over the outbreak of coronavirus in China. The virus has so far resulted in 4 deaths and is being likened to the SARS outbreak 17 years ago. Authorities confirming that the disease can spread between humans means that contagion could be far reaching, particularly with the high levels of travel around Chinese Lunar New Year.

Upbeat wage growth lifts pound
A stronger pound is also weighing on the FTSE. Upbeat wage data has helped GBPUSD snap a 3-session losing streak. After some particularly poor UK data recently, wages growth surprised to the upside increasing 3.2% versus an expected 2.9%. Following the unexpected contraction in November’s GDP, inflation striking a 3-year low in December and weak retail sales, traders were pricing in a 70% probability of a rate cut by the BoE. The upbeat wages data is helping push back on easing expectations. GBP/USD is advancing towards $1.3050. 
Pound strength is weighing on the multinationals on the FTSE, which earn profit and revenue abroad.

Movers & shakers
There are fewer climbers on the FTSE leader board this morning. However, Easyjet is standout gainer up just shy of 5% following an impressive trading update. Revenue +10%, passenger numbers +2.3%. Miners and Burberry dominated the loser board, these are stocks which are closely tied to the health of the Chinese economy.

Levels to watch
FTSE has sunk 1.2% in early trade, breaking through 100 & 50 sma and support at 7584. It is testing support at 7550 a breakthrough here could indicate momentum is building for a wider sell off.
Support can be seen at 7515 (an 8th low) opening the door to 7456. On the upside resistance is at 7650 (daily high) followed by 7680 ( 17th Jan high).

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account