FTSE 100 futures set to rise on stimulus and vaccine hopes this week

The FTSE 100 index closed 24 points higher to 6129.26 on Tuesday based on a new US stimulus package and hopes of a Covid-19 vaccine, with the futures market suggesting that UK equities could trade higher on Wednesday.

However, the blue-chip index’s recovery remains uncertain after US equities struggle as investors grow increasingly concerned about rising coronavirus cases as the country’s death toll increases to more than 150,000.

US stocks fall amid rise in Covid-19 cases and disappointing earnings

The Dow Jones Industrial Average is trading marginally lower at 26,509.39 (-0.28%) at the time of publication, with investors opting to take a wait and see approach as Republicans and Democrats debate a new stimulus package to offset the economic impact of the coronavirus pandemic.

The US index was dragged lower by disappointing earnings reports from McDonald's, 3M and Harley-Davidson this week, with all three companies falling short of analysts’ expectations.

However, there is positive news around the corner this week, with major American tech stocks like Apple, Amazon, Alphabet (Google) and Facebook all set to unveil their latest quarterly earnings on Thursday 30 July.

FTSE 100 recovery pinned on Covid-19 vaccine race

The recovery of British blue-chips remains tightly linked to the coronavirus pandemic, with its steady rise from mid-March lows being rocked by the threat of a second wave of infections in Europe and rising cases worldwide.

However, more domestically focused companies on the FTSE 250 had an easier time of it, with mid-tabled stocks closing 0.7% higher on Tuesday at 17,278.23 points.

Spain’s recent spike in Covid-19 cases is bad news for UK stocks recovery hopes, especially for those in the travel sector, who have had to contend with Prime Minister Boris Johnson’s decision to impose a 14-day quarantine on holidaymakers returning from the country.

Naturally the surge in coronavirus cases has made the race to find a vaccine even more intense, with drug makers like Pfizer, Moderna and AstraZeneca all competing to create a safe and effective treatment for the virus.

FTSE 100: technical analysis

The FTSE 100 managed to break through the 6144 swing high overnight, bringing about a fresh higher high which could spark a period of upside for the index, according to Josh Mahony, senior market analyst at IG.

‘Having pulled back into the 61.8% Fibonacci support level, there is a chance we could start to strengthen from here,’ he said. ‘As such, a bullish outlook is in play unless we break back below the 6084 level.’

FTSE 100: After-hours trading with IG

IG offers extended hours trading options for the FTSE 100 index and other major indices. Buy long or sell short on the FTSE 100 via CFDs and other instruments provided by IG's market-leading trading solution. Start by opening a live or demo account with IG today.