Markets shaken by oil shock as UK FTSE 100 (.FTSE) loses £125bn
A bloodbath stained trading floors across the world on Monday as traders reacted to a huge drop in the price of oil when Riyadh launched the first salvo in an oil price war against Russia.
Almost £125 billion was wiped off the value of companies on the FTSE 100 index of the UK’s top firms. And with investors already under pressure from the rapidly spreading coronavirus, the bottom fell out of markets on both sides of the Atlantic.
The FTSE 100 lost 7.7% of its value, losing 496.78 points to end the day at 5,965.77.
The price of international oil standard Brent crude was around 25% down at the end of trading in London on Monday, at 36.20 US dollars per barrel. It had rebounded from earlier 35% lows.
Saudi Arabia said it would cut oil prices after it failed to convince Russia to slash production in order to keep prices high.
It led to worries that recession might hit the economy.
“The fears of a recession are so high – investors are effectively assuming it’s a given at this point – that the market’s carcass is mighty unappealing at the moment,” said Connor Campbell, an analyst at Spreadex.
In London only one of the top 100 companies in the country ended the day in positive territory. Polymetal rose by 7.5p to 1,305.5p.
Even Tesco, which announced it was handing £5 billion to shareholders, was unable to make any gains despite flirting with a rise all day.
The FTSE’s European cousins, the Paris-based Cac and Germany’s Dax, fell 7.9% and 7.4% respectively.
In company news, Tesco’s shares came very close to breaking even, closing down just 0.1p to 240.5p after it agreed a deal to sell its supermarket arms in Thailand and Malaysia, in a move worth around £8.2 billion.
It said it will receive around £8 billion in cash proceeds from the buyer CP Group, Thailand’s biggest conglomerate, and plans to hand £5 billion of this to shareholders in a one-off dividend.
Insurer Phoenix Group has reported a jump in profits as its pension business benefited from UK companies rushing to offload risk ahead of Brexit. It fell 23.2p to 660.7p.
The FTSE 100 firm’s operating profits for the year to December increased by 14.4% to £810 million.
It has seen client numbers increase as UK companies sought to offload pension obligations from their balance sheets to improve their financial flexibility.
FirstGroup dropped 5.7p to 94.5p as an activist investor who failed to overhaul the board of the train and bus operator launched a second attack on the company.
Coast Capital, which has a 10% stake in FirstGroup, has accused bosses of failing to properly engage on its plans to sell the company’s North American bus and coach division.
Polymetal was the solitary riser on the FTSE 100, up 7.5p to 1,305.50p.
The biggest fallers on the FTSE 100 were BP, down 77p to 318.20p, Royal Dutch Shell B, down 290.8p to 1,304.80p, Royal Dutch Shell A, down 281.4p to 1,317.8p, Centrica, down 12.22p to 57.54p, and Aveva Group, down 734p to 3,532.00p.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 7,116.91.
The projected upper bound is: 6,260.17.
The projected lower bound is: 5,604.20.
The projected closing price is: 5,932.19.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 19.6373. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 18.20. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -170.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 4 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 14 period(s) ago.
Rex Takasugi – TD Profile
FTSE 100 INDEX closed down -496.780 at 5,965.770. Volume was 177% above average (trending) and Bollinger Bands were 300% wider than normal.
Open High Low Close Volume___
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 6,675.98 7,339.94 7,338.60
Volatility: 53 31 20
Volume: 1,393,479,296 780,335,168 744,347,520
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FTSE 100 INDEX is currently 18.7% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume out of .FTSE (mildly bearish). Our trend forecasting oscillators are currently bearish on .FTSE and have had this outlook for the last 29 periods. Our momentum oscillator is currently indicating that .FTSE is currently in an oversold condition.