The FTSE 100 Struggles to Stay Afloat Amidst Economic Contractions

The FTSE 100 Index (LSE: UKX) bears the brunt of economic indicators in the UK, which show signs of contraction. The UK S&P Global Services PMI declined from 55.9 to 55.2, 1% ahead of forecasts, and UK BRC Retail Sales declined from 5.2% to 3.7%. Furthermore, the UK is predicted to have one of the highest inflation rates this year following its modest decline despite continuous rate hikes by the Bank of England. 

This woeful economic activity might leave traders feeling cautious about the performance of companies within the FTSE, especially in a high-cost environment coupled with sluggish consumer spending. However, 37% of the FTSE comprises consumer staples companies and financial institutions, which may stand to benefit in times of economic struggle. Will economic indicators dampen trader sentiment, or will the sectors within the FTSE drive incentive?  


The rising wedge led to a 4.07% drop in the index level, forming a 7446.24 major support. Bullish sentiment then took over and allowed traders to establish resistance at 7647.83, which is in reach of the 61.80% Fibonacci Retracement Golden Ratio level. Bulls will likely attempt to retest this level before gaining upward momentum towards 7793.21. 

However, if economic data in the UK continues to show signs of economic contraction, the bears could take control and drive the price back down towards the 7446.24 major support. 


Poor economic data releases within the UK may make it difficult for bullish sentiment to continue, giving bearish traders a possible opportunity to retest the 7446.24 major support. However, if the companies within the FTSE 100 show resilience, the bulls may be able to keep the upward momentum going and drive the index past the 7647.83 resistance to intersect with the 50-day moving average. 

Sources: TradingView, London Stock Exchange, Reuters