European markets suffer Bank of England and the European Commission growth forecasts, FTSE drops over 1%

• The London shares were under pressure Thursday on global growth concerns.
• FTSE 100 dropped 79 points of 1.1% to 7,093.58 by the close. 

The UK's top flight index stumbled as both the Bank of England and the European Commission have cut forecasts for growth in 2019 and 2020. The FTSE 100 index started off on the front foot this month, extending the upside from the late Jan rally that was capped on Wednesday, laving a daily doji and trend reversal pattern on the charts. 

The index was holding up in the morning ahead of the BoE but then dropped 79 points of 1.1% to 7,093.58 by the close. The BoE decided unanimously to stand pat on interest rates at 0.75% and cut its growth forecasts for this year and the next which was a weight on sterling before positive Brexit sentiment flowed once again following news that the European Union agreed to work with Theresa May getting a deal through UK Parliament.

However, UK markets are not likely to hold up in the face of Brexit adversary and the BoE's pessimistic assessment of the UK economy,  stating that it expects 2019 to see the slowest growth since the recession in 2009 amid rising Brexit uncertainty. The BoE's growth forecast for 2019 was downgraded significantly to 1.2% from 1.7%, while the estimate for next year was also slashed to 1.5% from 1.7%. The bank sees just one rate hike fully price in over the next three years, forecasting inflation to move below the 2% level in the coming months.

On data, out earlier from lender Halifax, house price figures showed annual growth in the UK eased in January to 0.8% on the year last month from 1.3% in December, missing expectations for a 1.5% increase. Month on month, prices fell 2.9% in January following a 2.5% rise in December, far worse than the 0.5% expected decline.

Performers

On the corporate front, TUI AG Reg Shs (DI) (TUI) 954.60p -19.38% was the worst performer, cutting the tour operators earnings outlook due to warm weather and the weak pound. Ocado Group (OCDO) 873.80p -9.77% followed and WPP (WPP) 800.40p fell -8.38%. The best of the top flight index were Smith & Nephew (SN.) 1,545.00p 5.71% followed by Compass Group (CPG) 1,758.00p 3.66% and Hiscox Limited (DI) (HSX) 1,495.00p 1.77%. 

FTSE levels

The bulls have capitulated ahead of the 50% Fibo retracement target after surging well through the 38.2% fibo retracement of the same May 2018 decline located at 7040. Yesterday's business left a daily doji on the charts, a potential reversal imprint which leaves scope for a run back to the double top highs of 10th and 17th Jan located at 7002 and 7001. On the flipside, bulls can target the 50% fibo of the same range with the confluence of the 7200 psychological level.