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FTSE supported on retail sector, but fragile technically and ends down 0.62%

  • Stocks in London sunk and ended close to their lowest levels on Thursday after US technology giant Apple cut its first-quarter guidance, but the emphasis for markets was on China and the underlying cause of the weakness in the Chinese economy is creating world-wide risk aversion.

The FTSE 100 ended down 0.62% or 41.57 points at 6,692.66 with Apple's profit warning a rare surprise for investors that had otherwise relied on the giant's robustness in the face of adversity. Markets were expecting that sales over the Christmas quarter would come in at around $84bn, instead of previous guidance for between $89bn and $93bn.

The news is concerning and the outlook for global growth is on a knife-edge, putting data today in the US under more scrutiny than usual. The data arrived mixed, with the ADP report coming out with a 271,000 jump in hiring (consensus: 178,000), underlining the robust state of the US labour market ahead of tomorrow nonfarm payrolls data. Meanwhile, the ISM institute's closely-followed factory sector Purchasing Managers' Index collapsed from a reading of 59.3 in November to 54.1 for December; The fall was the largest one-month drop since 2008. For domestic data, the UK construction sector eased to a three-month low in December. Markit/CIPS's UK construction total activity index dropped to 52.8 from 53.4 in November.

Best and worst

As for performers, the mining sector was hurt on the back of the angst over China. Stocks such as Glencore, Anglo American, Rio and BHP were under pressure. On the other hand, the retail sector was buoyant with Next rallying after trimming its full-year profit guidance to £723m from £727m and reporting a 1.5% jump in sales over the holiday season, lifting the sector to see the likes of Marks & Spencer, Primark owner AB Foods and B&Q owner Kingfisher all ending the day higher. 

The top performers started with Next (NXT) 4,355.00p 4.14%, then Tesco (TSCO) 199.85p 4.07% and Morrison (Wm) Supermarkets (MRW) 216.55p 2.24%. The worst of the pack were Evraz (EVR) 442.10p -7.74%, then Burberry Group (BRBY) 1,624.50p -5.91% and Glencore (GLEN) 269.05p -4.76%.

FTSE levels

The index has stabilized above the pivot but remains on thin ice where the convergence of the 50% Fibo of the 2016 bull trend with a low, (6697) guards a selloff to below 6605, S1. The next target below there will be the 61.8% fibo of 6413 and the 76.4% located at 6061. However, there is a monthly doji and bulls have shown commitment on the daily sticks. On the upside, an immediate target sits at 6767 as R1, R2 6846 and R3 is at 6931.



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