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UK's FTSE drops below the 23.6% Fibo and 7000 psychological level

  • The FTSE ended mixed, with tobacco shares weighing on a downgrade by brokers, while retailer Dunelm was ending sharply higher after a well-received trading update. The index dropped 0.39% or 26.54 points at 6,810.88.

Investors await the sound bites from a highly anticipated meeting between officials from Beijing and Washington due to meet later in the day in what will be the first discussions since Trump and Xi Jinping agreed on a temporary truce in December ahead of the March deadline to the tariff ceasefire. 

Elsewhere, ears were to the ground ahead of the "meaningful vote" on Brexit that is due take place in the House of Commons on 15th January. UK PM May warned that Britain would be in the unchartered territory if her Brexit deal is rejected by parliament and said the vote would be held around 15th January as expected. May also left open the possibility of a 2nd referendum but stated that this is not a course of action she wanted to follow. Theresa May was still trying to extract concessions from the European Union to make her deal more palatable for Conservative MPs. Across the pond, in the US, Trump remains firm on his ambitions to build 'The Wall' and the government shutdown entered its third week. 

Best and worst

As far as corporate news went, Imperial Brands and British American Tobacco were among the worst performers in the top 100 shares in the UK. Tumultuous times in the tobacco industry are far from over, warned analysts at Cowen on Monday as they downgraded British American Tobacco and Imperial Brands. On the upside, homewares group Dunelm surged as it struck a note of caution about full-year results due to "unprecedented" uncertainty caused by Brexit, but posted 9% growth in total like-for-like sales for the second quarter, with LFL stores revenue up 5.7% year-on-year and online revenue 37.9% higher. Looking ahead for the week, the retail sector will be firmly in focus. The market awaits updates from Marks and Spencer, Wm Morrison, Sainsbury and Tesco, all of which kicked the week off in the on a positive note, so far. 

The top three performers were, NMC Health (NMC) 2,812.00p 7.33%, followed by Fresnillo (FRES) 916.00p 4.66 and then Antofagasta (ANTO) 808.27p 3.03%. The non performers were Smurfit Kappa Group (SKG) 2,080.00p -5.20% followed by Imperial Brands (IMB) 2,330.00p -4.99% and finally, Centrica (CNA) 131.25p -4.41%.

FTSE levels

Technically, the index has risen to the 23.6% retracement Fibo of the early summer 2018 decline, converging with the late October 2018 lows, although bulls ran out of steam and the daily sticks show indecisiveness at this juncture. The daily doji should be a warning to bulls. However, while above the pivot point, located at 6790, the 7000 psychological remains vulnerable with a target on the 50% Fibo of same range located at 0.7220 and early Sep lows - Both MACD and RSI are in positive territory, leaning with an upside bias.


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