Airline and Energy Shares Limit Losses on FTSE 100 – 7000.00 Level Seems A Good Support

U.K shares pared earlier losses in early trade on Thursday after a disappointing reading on domestic retail sales weighed on British Pound. While housebuilders were still under pressures from concerns of a so-called hard Brexit, shares of energy companies continued to rally despite a retreat in oil prices.

The Office for National Statistics reported U.K retail sales were unchanged in September from August, which were below expectations of analyst who had forecast a 0.2% increase last month. After a strong summer, retail sales stagnated as soaring prices and unusual warm weather hit demand for clothing and footwear.

British consumers may come under more price pressures in the coming months as a weak pound is stocking inflation by causing imports goods to be more expensive. According to the ONS on Tuesday, U.K inflation rose 1.0% in September – the highest monthly accelerating pace since November 2014. Limited wage growth is another factor that may limit consumer spending, one of the U.K.’s key engines of growth. Figures on Wednesday showed real wages growth hit its weakest level since the end of 2015.

Oil prices pulled back on Thursday after soaring strongly yesterday owing to an unexpectedly 5.25-million-barrel drop in American stockpiles. However, bullish sentiment remained and fueled shares of London-listed energy companies. Shares of Royal Dutch Shell PLC gained 0.58%, while BP PLC added 0.08%.

Airline shares rose after German Deutsche Lufthansa AG raised its full-year earnings forecast. The Germany’s largest airline said late Wednesday that it forecast adjusted earnings before interest and taxes for 2016 to be roughly on par with last year’s €1.8 billion ($2 billion) level. U.K’s Easyjet added 2.00% and British Airways parent International Consolidated Airlines Group SA gained 2.44%.

Among issues trading in the red, housebuilders among the biggest decliners.  Shares of Taylor Wimpey PLC dropped 1.86%, Barratt Developments PLC fell 1.9% and Persimmon PLC PSN, -1.12% shed 1.12%. Building-products supplier Travis Perkins PLC prolonged its slide by giving up another 0.49%, after losing 4.4% on Wednesday as the company issued a profit warning.

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Fig: FTSE 100 technical chart

FTSE 100 index has been trading in a narrow range since Tuesday, which left RSI moving almost in a horizontal line and ADX dipping below 20 – the level divides a market that has  a clear trend (or is forming a trend) from a market that is moving sideways. However, it seems like the index is being supported by two MAs placed below the price action which could be levels for a reversal into uptrend.

FTSE Trade suggestion

Buy Limit at 7010.00, Take profit at 7035.00, Stop loss at 6995.00

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