Stock markets all around the world are plunging today. Sell-off is reasoned with mounting concerns about a default of the Chinese real estate company, Evergrande, and potential spillover effects. Exact damage to the Chinese stocks is unknown as markets in China are closed for holiday today. However, many Hong Kong-listed Chinese companies plunged massively today and the Hang Seng index dropped over 3.3%.
Session in Europe was also launched in downbeat moods – majority of the blue chips indices from the Old Continent traded 1.5-2% lower. UK FTSE 100 (UK100) is one of the better performing European indices as it drops “only” 1.4%. A look at UK100 chart shows us that the index has broken below the lower limit of the downward channel and has reached the lowest level since mid-July. UK100 currently tests support zone marked with the 23.6% retracement of a recent upward impulse as well as the 200-session moving average. In case bulls fail to hold declines there, a downward move towards July lows in the 6,750 pts area may be on the cards.
A point to note is that Bank of England is set to announce its rate decision this Thursday at 12:00 pm BST. Given a steep acceleration in UK inflation as well as recent chaos on the UK energy market, some hawkish calls may be made.
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