Yesterday, the stock market in the United Kingdom experienced a sharp decline following the release of new inflation data. The UK100 price, reflecting the leading British stock index FTSE, dropped approximately 1.5%. Moreover, the RSI indicator on the 4-hour chart fell below the value of 18 for the first time since July 2023.
Analysts attribute this decline to the published inflation data, which not only failed to meet economists' expectations but also indicated a possible strengthening of inflationary pressure in the country. CPI values: actual = 4.0%, expected = 3.8%, previous value = 3.9%.
This raised concerns among investors regarding the Bank of England's future steps in managing interest rates and the potential slowdown in the country's economic growth.
Sectors most sensitive to changes in interest rates, such as real estate and finance, showed the greatest decline. Significant decreases were also observed in the stocks of companies in the retail and consumer goods sectors, reflecting growing concerns about consumer confidence and spending.
The UK100 chart shows that:
→ the price dropped to the lower boundary of the channel, indicated in blue;
→ market weakness could be inferred from the inability of the UK100 price to stay above the September maximum in December, as well as price action around the 7665 level, which switched roles from support to resistance.
If new negative news emerges for the stock market, support from the lower boundary of the channel may be breached. In that case, it is not excluded that the UK100 stock index will decline to the level of 7300, which served as strong support throughout 2023.
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