FTSE 100 Tumbles Below 7,000 on Virus Concerns and Tobacco Review
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Key Talking Points:
- Tobacco shares drop as Biden studies new regulation regarding nicotine usage in the US
- FTSE 100 hangs on to the longer-term bullish trend as key support halts losses
The FTSE 100 fell sharply on Tuesday, dropping below the 7,000 only two days after managing to push above it for the first time in 14 months. The UK index was hard hit by a sharp fall in tobacco shares as news broke out that Biden is looking at introducing new regulations in the US regarding the level of nicotine in cigarettes. Imperial Brands PLC and British American Tobacco were down around 7%.
But the biggest loser in yesterday’s session was IAG, which dropped over 8% as airlines were bringing the FTSE 100 down further. The recent spread of an Indian variant of Covid-19 has investors worrying again about the prospects of international travel this summer, which jeopardizes the plans of European airlines like Easyjet, Ryanair, and Iberia to resume more normal activity in the next few months.
FTSE 100 Levels
It’s definitely premature to call yesterday’s pullback a change in trend. For now, it seems more like a short-term correction in the longer-term ascending trend, which would allow new buyers to come in at lower levels to bring the index higher again. Selling pressure was halted around the 6,846 level, which has been of increased significance in the last few weeks, so it will be a good area to monitor to see if further pullbacks are likely to be achieved.
If so, the ascending trendline from the January 31st lows will be the next reference support in the short-term, which is converging nicely with the 6,800 mark, a round level that could see some sideways pressure as it is likely to be an area with increased stop-losses and take-profits.
As long as the FTSE 100 stays above the ascending trendline then the longer-term bullish trend will be in play, so I would expect the index to drift higher towards the 7,000 mark again, although we may see some consolidation as increased resistance is found at the 76.4% Fibonacci (6,894). A break above 7,045 would likely see bullish pressure increase towards the 7,200 area.
FTSE 100 Daily chart
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--- Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.