The FTSE 100 fell by 1.36% on Thursday to 7,053 with miners and banks the principal sectors weighing on the index.
This suggests that investors have started to worry again about the strength of the economic recovery says Russ Mould, investment director at AJ Bell.
“You know it’s a bad day when only six stocks in the FTSE 100 are in positive territory. So much for the celebratory mood from last night’s England football win,” Mould said.
“Miners’ fortunes are heavily tied to commodity prices and the cost of metals and minerals is typically determined by supply and demand for industrial projects around the world.”
“Banks are also heavily influenced by economic activity. A strong period of growth means there could be greater opportunities to lend money to businesses and such a backdrop might also point to rising interest rates which increases the chance for the banking sector to make higher profit margins. If the economic outlook is not as strong, then investors start to go off banks for fear that it will be harder for them to push up earnings,” said Mould.
A pullback in the oil price is also bad for the FTSE 100 given how oil producers Royal Dutch Shell and BP are major constituents of the stock index and a decline in their share prices acts as a drag on the UK market.
In Asia, Hong Kong’s Hang Seng fell by just under 3% as Chinese tech stocks experienced a major sell-off amid fears of further regulatory interference.
“This year we’ve already had a big fine for Alibaba for violating anti-monopoly rules and more recently Chinese authorities told app stores to remove ride-hailing group Didi from their platforms, saying it illegally collected users’ personal data,” Mould said.
“China is clearly flexing its muscles and investors in this space should have already braced themselves for regulatory interference after the move on Alibaba.”
FTSE 100 Top Movers
Entain (1.85%), Just Eat (1.31%) and Ocado (0.22%) were the three companies leading the FTSE 100 on Thursday out of a handful in the green.
At the other end, Anglo American (-3.15%), Natwest (-2.98%) and Persimmon (-2.96%) made the biggest losses during the morning session on the FTSE 100.