The FTSE 100’s performance on Wednesday was a near perfect demonstration of a ‘buy the rumour, sell the fact’ trade as China said they would ease their strict COVID-19 restrictions.
China will now allow people to quarantine at home instead of state run facilities, and tests are no longer required to enter most day-to-day shops, work places and social venues. Healthcare and some government institutions will still require a test to gain access.
The FTSE 100 was broadly flat on the news with miners, oil companies and other China-exposed stocks falling on profit taking.
These companies have enjoyed a sharp rally during November as unrest in China raised hopes authorities would soon roll back on their stringent, and economically damaging, restrictions.
Confirmation China would begin easing proved to be a catalyst for investors to book some of the sharp gains enjoyed over the past month.
UK Housebuilders
UK housebuilders were weaker after more data showed UK house prices were falling.
“This is the biggest house price monthly fall since the last financial crisis and highlights the volatility in house prices in the aftermath of the mini-budget crisis,” said Joshua Raymond, Director at online investment platform XTB.com.
“It’s no surprise therefore to see such dramatic falls on a monthly basis and the fact the falls are felt fairly broadly across most UK regions highlights the fact the consequences of the mini-budget was felt across the entire sector. Removal of mortgage offers, sharply higher borrowing costs and rising inflation are all key factors behind this fall in house prices.”
Persimmon, Barratt Developments and Taylor Wimpey were all weaker on the day.
GSK
GSK helped offset weakness elsewhere in the FTSE 100 on Wednesday after the pharma giant revealed a positive outcome from a court case concerning the risk of cancer in specific trials.
“Shareholders in pharmaceutical giant GSK got some timely pain relief with news that it, plus its peers Pfizer and Sanofi, had successfully defeated thousands of lawsuits suggesting the heartburn drug Zantac caused cancer,” said AJ Bell investment director Russ Mould.
“This outcome is probably the best GSK could have hoped for given how comprehensively the judge in the case dismissed the plaintiffs’ arguments.
“While there is some risk of an appeal, and there are other cases outstanding, GSK will be sitting a lot more comfortably than it was before this judgement was handed down.”
GSK shares as much as 10% higher, before the rally faded as the session developed.