The latest Lloyds share price news
Today, Lloyds Banking Group (LLOY) is regarded as the icon of the UK banking system.
However, only a decade ago, in 2008, it was on the verge of bankruptcy, as were many banks around the world at the time that were hard hit by the collapse of subprime mortgages. This collapse triggered the global financial crisis and left many banks with uncovered negative positions on collateralised debt obligation (CDO) derivatives. The Lloyds share price trend at the time showed a steep drop from 2007 to the start of 2009, necessitating a bailout of £20.3bn by the UK government.
By December 2019, the UK government had recovered its entire bailout fund from the iconic British lender, and on 13 December 2019, they sold off all but a tiny equity holding in the bank. This sale surprised many and caused a 52 per cent Lloyds share price drop.
After the sale of these shares by the UK government, Lloyds shares latest news has not been exceptionally positive. First, there were the layoffs that the bank had to conduct because it needed to restructure its operations to a more digital-friendly, cost-effective structure. Next, negative Lloyds news regarding compensation payments to clients who were sold a particular misrepresented insurance product hit the newswires. All these less-than-optimistic events have continued to depress the price of the stock.
Lloyds bank's struggles mirror that of the UK economy, which has led at least three Bank of England board members to consider rate cuts on at least three occasions. Just as the country was about to conduct trade negotiations with the EU following its exit from the European Union, the coronavirus outbreak hit. The pandemic has crashed the FTSE 100, with the latest Lloyds share price chart indicating a steep decline on the back of massive selloffs.
Many of you may be asking: why are Lloyds shares so low? The answer lies in the combination of factors that are at play now. For all you know, the question should be: are Lloyds shares low enough for me to purchase them? A look at the latest Lloyds share price trend will provide some insight.
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The latest Lloyds price analysis
The latest Lloyds share price drop occurred as a result of risk aversion in the financial markets, triggered by Saudi Arabia’s punitive moves to increase oil supply in an attempt to punish Russia for refusing to deepen production cuts. Global stock markets ran riot and ended up sharply lower, hitting price levels not seen since the global financial crisis. A similar fate befell Lloyds.
Here is the picture on the weekly chart, which shows the outlook for the medium-term:
Without any major Lloyds share news for the week, the technical patterns on the chart could provide some direction going forward. The weekly chart reveals the presence of a descending triangle, which has already been broken by the downward price action of last week. Having breached support levels at 0.4768 (triangle’s lower border) and the 0.3704 price level, the price looks set to target the 0.2836 price area.
We should also note the presence of the previous double bottom on the left side of the chart. The troughs that form the two bottoms is also the site of a previous 2009 price low. This is expected to serve as another support level, which becomes relevant if 0.2826 is taken out by further bearish action in the market.
The 0.2241 price level (2009 lows and double bottom troughs) will mark the completion point of the measured move from the triangle’s broken border. Technically speaking, this is where the downside move is expected to end.
However, prices do not move in a straight line. If there is positive Lloyds stock news in spring 2020, such as a good earnings report, we could see some price recovery in the short term. If this were to happen from present price levels, we would expect the broken support levels to reverse roles and act as new resistance points. Therefore, 0.3704 and 0.4768 are potential resistance targets. It is now unusual to see pullbacks occurring after such aggressive moves. Moves to the south are usually more aggressive than the bullish counterparts. Pullbacks tend to result from profit taking. A pullback all the way to the triangle’s lower border cannot be totally ruled out.
There is also the potential of any unexpected Lloyds share news altering the market sentiment and providing new trade scenarios.
Short to mid-term Lloyds price forecast: a look into the future
Experts seem to agree on the fact that the latest Lloyds share price news as pertains to the specific fundamentals of the stock may not be the short-term to mid-term driver of the company’s share price. Rather, the impact of the coronavirus outbreak on the UK economy and businesses within the country and the response of the UK government will dominate price action.
Lloyds share price has tanked 25 per cent in the last month, but this is due to the disease spread; a systemic shock. There may have been pandemics in the past which featured fast recovery of the stock markets, but things will be different this time. This is the view of Interactive Investors analyst John Burford.
Burford believes that the economic conditions in 2019/2020 have not been in a good place, and the impact of the coronavirus will make it very hard for the UK banks to operate profitably. He is bearish on Lloyds shares as well as the FTSE 100 as a whole in 2020.
Edward Sheldon of the Motley Fool believes that the massive exposure of Lloyds bank to the UK economy, whose growth forecast was halved by Deutsche bank even before the coronavirus outbreak, could pose significant downside risks to the bank. The latest rate cuts may also cut the bank’s profitability potential for 2020. He sees Lloyds as a very risky speculative buy at current prices, and only then for those who may be willing to ride the storm for a few years.
CNN Money did a poll of 21 analysts. Twelve of these analysts are of the opinion that Lloyds shares are a buy, 5 feel that the stock is a hold, while 4 feel the stock will underperform and therefore should be on the selling recommendation list.
The Economy forecast agency projects that Lloyds share price will continue to slide heading into April 2020.
On the institutional front, Goldman Sachs has reaffirmed its sell rating on Lloyds. Barclays is on the same page as Goldman Sachs, as it maintains that Lloyds is overweight. HSBC and Citibank have upgraded their investment rating on Lloyds share price from hold to buy, while JP Morgan maintains a neutral rating on Lloyds stock.
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