The FTSE 100 is down by 0.92% during the morning session on Tuesday as Reckitt delivered a disappointing trading update, in addition to weakness among mining stocks.
“It’s no surprise to see Unilever fall in sympathy with Reckitt as investors are likely to be questioning the true defensive characteristics of these consumer goods companies. Yes, their products may be in demand during good and bad economic conditions, but that doesn’t mean profit margins can’t be squeezed,” says Danni Hewson, financial analyst at AJ Bell.
As reported yesterday, sentiment towards Chinese companies worsened as the government continues too come down on tech firms. Hong Kong’s Hang Seng index fell 4.5% with some of the big tech stocks weighing on the index including delivery platform Meituan down 15% and internet giants Alibaba and Tencent both declining by approximately 8%. “Those movements weighed on FTSE 100 investment trust Scottish Mortgage which has stakes in all three companies,” said Hewson.
“It’s been a difficult year for investors in Chinese stocks due to regulatory interference. This has been an underappreciated risk for companies where most of the attention has been on the fast levels of revenue growth.”
“Another bout of US companies will report earnings later today including Alphabet, Apple and Microsoft and a strong showing from them could encourage some investors to ditch Chinese tech names in favour of the more familiar US names. However, regulatory intervention also remains a big risk to this part of the market, as concerns grow over the largest players having too much power.”
FTSE 100 Top Movers
Croda International (4.24%), Just Eat (1.89%) and Segro (0.67%) are elating the way on the FTSE 100 on Tuesday out of the few companies to be in the green.
At the bottom end, Reckitt (-8.55%), Informa (-3.64%) and Intermediate Capital Group (-3.23%) are the biggest fallers during the morning session.