FTSE 100 Struggles to Consolidate Additional Upside Momentum on Brexit Considerations

Key Speaking Factors:

• EU confirms that Brexit talks have stalled
• UK retail gross sales elevated in October

The FTSE 100 appears to carry regular this morning as UK property put together themselves for extra Brexit turmoil, as information broke final evening that EU negotiator Michel Barnier had halted face-to-face negotiations as a result of a Covid-19 outbreak in his staff.

In a single day, US shares managed to interrupt three days of continued declines, ending with modest beneficial properties, which appears to be the explanation why the FTSE 100 has began the session barely larger, however beneficial properties appear unlikely to carry given constructive momentum in Europe has largely light.

The macro-environment doesn’t appear too promising as of present, with rising Covid-19 infections world wide inflicting an increasing number of social restrictions, undermining the opportunity of a swift financial restoration as soon as a vaccine is finally rolled out. To prime this, Brexit negotiations, which have seen conflicting headlines in the previous couple of days, appear to have hit one other useless finish after every week of intense negotiations passed off in London.

EU CONFIRMS NO PROGRESS HAS BEEN MADE

Regardless of Barnier tweeting yesterday that he wouldn’t be attending the EU leaders briefing this morning because of the must self-isolate, the assembly was nonetheless scheduled to go forward, however merchants remained uncertain that any important progress can be introduced in his absence, inflicting the British Pound to drop barely in opposition to the Greenback as information broke. And suspicions had been proper, as EU envoys had been briefed this morning that every one three Brexit hurdles – fisheries, a degree taking part in area and governance – stay unresolved, including that the UK had not made any concessions on these points, exhibiting as soon as once more a hardened stance from the EU.

Talks at the moment are set to proceed remotely, however Quantity 10 is adamant that while progress must be made to safe a deal, it can’t be executed at the price of the UK’s sovereignty. The main target will stay on any signal that there’s a decision in sight, as speculations develop whether or not each events are prepared to just accept a no-deal given present macroeconomic conditions. Regardless of a stronger Pound being a damaging issue for UK shares, within the occasion of a deal we’d doubtless see shares pushing larger as an indication of aid given the top of uncertainty, presumably adopted by corrections as the knowledge units in.

On a extra constructive observe, UK retail gross sales figures had been launched this morning, exhibiting that spending had elevated 1.2% in October from the earlier month, with the yr on yr studying coming in at 5.8%. That is doubtless as a result of early Christmas purchasing forward of the November 5th closure of all non-essential companies, pointing to a potential decline in November after 6 months of development.

FTSE 100Each day Chart (15 January – 20 November 2020)

The FTSE 100 struggles to beat a key Fibonacci degree as vaccine optimism, which helped consolidate a major restoration from the Octiber 30th lows, continues to fade. The UK inventory index reached a five-month excessive on Monday however discovered elevated resistance at 6465, the place the 61.8% Fibonacci retracement from 7549 to 4776 is discovered. This degree was important again in the summertime highs seen in June, as consumers had been unable to consolidate above this degree regardless of market optimism on the time. A break above this important resistance would put deal with the 76.4% retracement, the place an try to get well from the primary coronavirus falls had been halted. Shifting averages appear to point out that additional upside is feasible, however momentum is stalling, inflicting decrease highs for Four consecutive days.

— Written by Daniela Sabin Hathorn, Market Analyst

Observe Daniela on Twitter @HathornSabin