Lloyds share price (LLOY) is among the worst-performers in the FTSE 100 today as investors continued to price-in the possibility of negative interest rates in the UK. The bank’s shares also reacted to the weak employment numbers from the UK. Other UK banks are in the red, with Barclays shares down by more than 2.7% and NatWest down by more than 2%. Standard Chartered and HSBC shares are also down by more than 1%.
Lloyds, the biggest bank in the UK has been struggling. Its stock has tumbled by more than 56% this year alone. It has underperformed most banks in Europe and the SPDR Bank ETF (KBE) that has fallen by more than 28% this year. The same trend is true for the past decade as the bank’s stock has fallen by more than 60% vs KBE’s decline of about 40%.
In recent months, Lloyds share price has fallen because of the rising possibility of a no-deal Brexit and the overall deteriorating of the UK economy. For starters, Lloyds tends to be more vulnerable than some of its peers like Barclays because it does not have major operations abroad. The bank also does not have a trading division, which has been relatively profitable for other banks.
Low interest rates and its exposure to the vast mortgage industry have also helped push Lloyds share price lower. Indeed, while the number of mortgage applications has increased, analysts believe that delinquencies will start rising as the unemployment rate rises. Indeed, data released today showed that the rate of unemployment has soared to 4.5% and there is a likelihood that it will reach more than 7% by end of the year.
At the same time, the Bank of England has said that it is considering negative interest rates. Indeed, according to the Financial Times, the bank has asked the country’s banks to start preparing for this possibility.
Meanwhile, some well-known investors have started to short the bank shares. Among the most notable ones is Marshall Wace, a leading investor who has placed a bet that the Lloyds share price LSE will continue falling.
Also, analysts have mixed opinions about the bank’s shares. In recent reports, those at JP Morgan said that the shares will climb to 37p while those at Citi have a buy rating. Similarly, Jefferies analysts expect it to climb to 39p.
The daily chart shows that Lloyds Bank share price has been under intense pressure in recent days. Indeed, it is trading close to its lowest level in more than a decade. It has also formed a descending triangle pattern and is slightly above the 25-day and 15-day exponential moving averages. The current price is along the upper side of this triangle.
Therefore, I suspect that in the near term, the stock will continue falling as bears target the support level at 23.53p. However, a break above the upper support will invalidate this trend.
