The bloodbath is resuming on Wednesday. After recording gains of 2.7% in the previous session, the FTSE is plunging lower in early trade as the Chancellor’s blowout bailout has failed to maintain any level of positivity in the markets.
Chancellor Rushi Sunak announced a £330 billion rescue package to help struggling businesses cope with the economic impact of coronavirus. The bailout package aims to keep Britain afloat and offers a lifeline to those businesses that the governments stricter social distancing, isolation and quarantine measures will negatively impact.
Consumption will drop severely as people stay in their homes. Restaurants, shops and pubs will be hard hit so the Government announced a one-year break from business rates, as well as government grants of up to $25,000 will help to alleviate the pain. Banks have also agreed to give struggling customers a mortgage holiday of up to three months. An additional support package for the badly hit airlines will be announced in the coming days.
Yet despite Chancellor Rishi Sunak’s colossal bailout package the markets’ response is very concerning. The fact that the FTSE has failed to hold onto any of the gains quite simply suggests that this is not enough. There needs to be a coordinate global response, which up to now hasn’t happened. As a result, the markets are vulnerable to further fallout.
What next?
Eyes are now turning to the European Stability Mechanism and what more the White House can bring to the table.
With fear driving the markets and coronavirus numbers escalating, there is a good chance that this overly bearish picture won’t show any signs of improvement until the coronavirus numbers themselves start to improve.
Levels to watch
The FTSE is trading down 3.9% at 5088 the time of writing. It trades below 50,100 and 200 sma on 4-hour chart, a bearish chart.
The price found support for a second straight session just shy of 5000. Immediate support is at 4996 (today’s low), prior to 4987 (yesterday’s low) before 4840 (16th March low).
Resistance can be seen at 5370 (yesterday’s high) A break above this level is needed to negate short term bearish trend. Resistance is then seen at 5700 (13th March high).
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