Invezz.com - The FTSE 100 index has come under pressure in the past few weeks, trailing its global peers like the Nasdaq 100 and S&P 500 indices, which have surged to their all-time highs. It ended last week trading at £8,177, higher than last month’s low of £8,075.
Bank of England’s decision ahead
The FTSE 100 index will be in the spotlight this week as the Bank of England (BoE) delivers its interest rate decision.
Economists believe that the bank will decide to cut interest rates by 0.25%, bringing the official cash rate to 4.75%. If this happens, it will be the second rate cut this year.
Recent economic numbers help to justify a rate cut by the BoE. Inflation has moved below its 2.0% target, while the economy is growing albeit at a slower pace.
The key FTSE 100 companies to watch after the BOE decision will be banks like Barclay’s, Lloyds (LON:LLOY), HSBC (LON:HSBA) and Standard Chartered (LON:STAN). The other firms that will be impacted by the decision are housebuilders like Taylor Wimpey (LON:TW), Persimmon (LON:PSN), and Barratt Developments (LON:BTRW).
The BoE decision will come a day after the Federal Reserve delivers its second-last decision of the year. Economists see the Fed cutting rates by 0.25% after a report showed that the labor market worsened in October as the economy added just 12,000 jobs, the lowest level in over two years.
The BoE meeting will also come a day after the winner of the next US election is announced. Polymarket and other prediction markets estimate that Donald Trump will win the election, while official polls are too close to call.
Therefore, there is a likelihood that the election winner will have a big impact on global stocks. A Trump win will have more volatility than a Kamala Harris victory because it will point to a change of policy.
The FTSE 100 index is also reacting to last week’s budget by Rachel Reeves, which introduced new tax measures that most people in business don’t like. For example, she increased the insurance deductions in a bid to raise over £48 billion in funds.
Key UK earnings ahead
The FTSE 100 index will also react to several earnings from some of its biggest constituent companies.
The most notable one will be BT Group (LON:BT), the parent company of EE and Openreach, which will report its numbers on Wednesday. These results come after a change of ownership, with Bharti Airtel being a key investor in the company.
National Grid (LON:NG), one of the top power companies in the UK and the US will be the next company to watch when it releases its results on Thursday.
Sainsbury’s, a top UK retailer, will also publish its earnings on the same day. These numbers will help to determine whether consumer spending is continuing.
IAG (LON:ICAG), the parent company of British Airlines will publish its numbers on Friday. These will be notable results since the company is one of the best-performing players in the airline industry this year.
The other top companies to watch this week will be ASOS (LON:ASOS) and Associated British Foods (LON:ABF), a company that owns Primark, a top clothing retailer in Europe. It also owns ABF Sugar and AB Agri.
FTSE 100 index analysis
FTSE 100 chart by TradingView
The weekly chart shows that the FTSE 100 index has moved sideways in the past few months. It has remained inside the support and resistance levels at £8,115 and £8,472.
The index has moved below the 50-day Exponential Moving Average (EMA). It has also formed an inverse head and shoulders pattern, a popular bullish sign. Also, it formed a bullish flag pattern.
Therefore, there are odds of more gains in the coming weeks. If this happens, the index will likely rise and retest the key resistance level at £8,472. However, a break below the key support at £8,073 will point to more downside.