FTSE 100 futures set to slide on poor EU economic data

FTSE 100 futures are trading below 6000, suggesting the index will open lower on Monday, with investors’ reacting to disappointing economic data from the UK, France and Germany.

The Office of National Statistics (ONS) revealed that UK public debt at the end of July was larger than the entire UK economy for the first time in more than 50 years, with similar data from France and Germany suggesting that the eurozone’s economic recovery was slowing.

In France services flash purchasing managers’ index (PMI) came in at 51.9, down from 57.3 in July, while Germany fell to 50.8, down from 55.6 last month.

The DAX closed 0.51% to 12,764 on Friday, the CAC 40 slid 0.3% to 4896, while the FTSE 100 dipped to an intra-day low of 5995 points before finally closing a touch above 6000.

FTSE 100 futures are trading at 5991 points at the time of publication.

UK PMI data points to deep recession

Duncan Brock, the group director at the Chartered Institute of Purchasing & Supply (CIPS), said that the latest PMI data suggests that the UK is heading for the ‘deepest recession in living memory’.

He also believes that it is too early to celebrate a Covid-19 recovery, with British businesses about to face the ‘harsh reality of job shedding’ once it loses the protection of the UK government’s furlough scheme in October.

‘Reducing headcount was a quick fix for many firms struggling to maintain strong supply chains and their position in the marketplace amidst higher raw material and import costs,’ Brock said. ‘With the fastest rise in activity in the private sector since October 2013, this shows an encouraging speed towards recovery which belies the fact there are still some dark forces at play.’

‘Rising inflation, the sustainability of the UK economy during a global pandemic and the poor employment figures means we’re not out of the woods yet,’ he added.

FTSE 100: technical analysis

The FTSE 100 continues to decline, losing ground over the past week and a half, with a break below 6000 likely to open the path to 5860 and the low from the end of July, according to Chris Beauchamp, chief market analyst at IG.

‘At present price action is not pointing to any sign of a near-term rebound, with even the short-term rallies of the past week running into sellers,’ Beauchamp said.

‘A rally through 6060 would signal perhaps that a more meaningful break to the upside is developing, with the lower highs at 6110 and 6170 immediate targets in the event of a move higher,’ he added.

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