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Market Analysis || 31-01-2020

This week began with a renewed selloff in global stock markets, sending virtually every major stock index lower. The UK 100 was not immune to the coronavirus-induced selloff, which prompted the UK Index to experience probably the biggest weekly drop in months. Throughout the week, risk-off sentiment was fully at play as investors worried about the economic impact of the coronavirus. Fears were heightened in the UK as the Public Health department confirmed the first two cases of the virus in the UK.

Another dampener for the UK 100 was the decision of the Bank of England (BoE) on Thursday January 30 to hold interest rates, in a vote that saw 2 MPC member maintaining their rate cut stance as opposed to the market expectation that 3 members would vote for a rate cut. This was viewed as a hawkish stance and led to broad-based strengthening of the British Pound. This however led to further weakening of the UK 100 . Stock markets typically benefit from reduced interest rates or dovish stances by a central bank, as it discourages investment outflows into the bond market.

In a startling development, only 8 companies are in the green for the week. The UK 100 ’s top gainers include the following companies:

  1. Reckitt Benckiser Group (3.46%)
  2. Whitbread (2.3%)
  3. Rolls-Royce Group (2.05%)
  4. Unilever (1.48%)
  5. Polymetal International (1.28%)
  6. United Utilities Group (0.79%)
  7. Persimmon (0.31%)

The top losing stocks on the UK 100 in a densely populated losers’ list for the week include:

  1. Royal Dutch Shell (-8.09%)
  2. International Consolidated Airlines Group (-7.83%)
  3. Diageo (-7.82%)
  4. Rio Tinto (-7.27%)
  5. Standard Chartered (-7.17%)
  6. EasyJet (-6.80%)

All price gains and losses are current as at 11:15am GMT.

The hospitality and travel stocks were among the worst hit as airlines cancelled flights into China all over the world. Many countries are also warning against all non-essential travel to China as the coronavirus infection spreads.

Technical Outlook for UK 100

The UK 100 was unable to breach the descending trendline on the weekly chart which connects the highs of price action from early 2018 to date on the weekly chart, close to the horizontal resistance level at 7731.2. From then on, it was downhill for the UK 100 as investors bailed out to safe haven assets such as gold and silver, as well as alternative investments in cryptocurrencies.













UK 100 Weekly Chart: January 31, 2020

The down-trending price action tore through all support levels from 7629.6 all the way below 7527.7. Price is now approaching the next support at 7246.4, which is where the channel’s lower border intersects the horizontal price level.

The daily chart reveals a clearer picture of the price action. Friday’s trading session kicked off on a very bearish note as news of the coronavirus entering the UK triggered more investor panic. The bearish candle has broken below the 7420.2 support level and looks like it still has more downside momentum.












UK 100 Daily Chart: January 31, 2020

A break below 7246.4 takes the price below the ascending channel for the first time since the channel was formed in December 2018. This takes the UK 100 towards the next support level located at 7127.2, where previous lows of 9/10 October 2019 as well as a cluster of lows of the first week of December 2019 are located. Further break of this price level opens the door for the UK 100 to target the 7006.3 price level (previous lows of 25 August and 3 October 2019).

On the flip side, a recovery that comes in the form of a possible bounce on 7246.4 could allow the UK 100 to make another leg up as it continues to trade within the channel. This could setup possible contact with the 7420.2 price level (now acting as a resistance), with 7527.7 flying overhead).


Bulls still need to see the resistance zone at 7420.2 breached to the upside for the UK 100 to continue the upward run of a possible price bounce from the channel’s lower border. This bounce allows the UK 100 to continue to trade from one border to the other within the channel.


A downside breach of 7246.4 sets up further downside push as this move would break down the channel for the first time since the channel formed 14 months ago. This makes this price level a critical one for bears.

  • Prices to watch: 7420.2 (bulls) and 7246.4 (bears).
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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.

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