The FTSE 100 <.FTSE> index is seen opening weaker on Thursday, tracking falls on Wall Street after ratings agency Fitch said the outlook for U.S. banks could deteriorate if the euro-zone's debt crisis is not resolved quickly.
The UK blue chip index looked set to shed 34 to 36 points, or as much as 0.7 percent, according to financial bookmakers, having closed down 8.42 points, or 0.2 percent, at 5,509.02 on Wednesday, after yet another rollercoaster session in which it swung more than 110 points -- hitting a low of 5,450.24 and reaching a high of 5,562.91.
Fitch Ratings on Wednesday warned that it may reduce its stable rating outlook for U.S. banks with large capital markets businesses because of contagion from problems in troubled European markets.
Unless the Euro zone debt crisis is resolved in a timely and orderly manner, the broad outlook for U.S. banks will darken. The risks of a negative shock are rising, Fitch said.
Following the warning, Morgan Stanley
Looking at technicals on the FTSE 100, James Hyerczyk, an analyst at Autochartist, said that based on the long-term range of 4,868.60 to 5,747.30, the first downside target is the retracement zone at 5,307.95 to 5,204.26, but even if the trend changes to down, a bounce to the upside is possible, triggered by a test of this zone.
This bounce will be a short-covering rally which is likely to set up the next selling opportunity.
In terms of domestic economic data, UK October retail sales are due at 9:30 a.m.
Across the Atlantic, U.S. data includes October housing starts and the latest weekly jobless claims at 1:30 p.m., and the November Philly Fed index at 3 p.m.