FTSE 100 bounces after brutal equities sell-off

The FTSE 100 was up 0.2% to 7,103.6 in early afternoon trading on Thursday as the market recovered slightly from the barrage of selling in earlier trading.

“Red was the dominant colour on the markets across Asia and Europe, following a similar showing on Wall Street last night. Investors just cannot find a good enough reason to shift their bad mood and so the selling continues,” said AJ Bell investment director Russ Mould.

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Overnight, the NASDAQ closed was down 0.1% to 11,053, the Dow Jones slid 0.4% to 14,352.7 and the S&P 500 dipped 0.1% to 3,759.8.

Going into the US open, S&P 500 futures were pointing to the index opening 20 points higher.

Commodities declined on recession fears, as investors kept a wary eye on the gloomy macroeconomic prospects. In addition, the price of copper dropped to a three-month low as China maintained a strict zero-Covid policy, threatening global production if major economic hubs re-enter lockdown.

“Investor sentiment towards commodity producers is heavily influenced by the global economic outlook which is not great at present,” said Mould.

“The market is worried that central bankers will make a policy mistake in their fight against inflation by pushing up interest rates too fast and causing a recession. The perfect scenario is a soft landing, but that is hard to achieve.”

“The price of copper for delivery in three months’ time sunk to a 16-month low amid worries about the economic outlook and fears about Covid cases in China, a country known for its ravenous commodities demand.”

Anglo American fell 0.6% to 3,185.2p, Antofagasta dipped 1.6% to 1,223.2p, Croda slid 0.8% to 5,991p, Endeavor dropped 2.5% to 1,7565p and Fresnillo lost 3.4% to 785p.

Housebuilders

The housebuilders continued to feel pressure from rising 9.1% inflation and 1.25% interest rates, as the cost of living finally threw a splash of cold water on the red-hot demand.

Barratt Developments dipped 1.3% to 453.7p, Persimmon fell 0.8% to 1,793.2p and Taylor Wimpey slid 0.6% to 155.7p.

Polymetal

Meanwhile, Polymetal landed back on the radar with its recent business update, confirming it still had the capability to sell gold from its Russian and Kazakhstan operations, with production picking up after Covid put a dampener on its projects for a couple of months.

The mining group warned investors that dividend payouts would be curtailed by liquidity and operational challenges, reflecting the rough time the company has endured since anti-Russian sanctions sent their stock price tumbling off a cliff.

“Russia-focused silver and gold miner Polymetal reassured the market that it was still able to sell gold from its operations in Kazakhstan, and that Russian operations were picking up after Covid-related slowdown in April and May,” said Mould.

“Polymetal said it would decide in September whether to pay dividends. Given rising net debt and short-term liquidity challenges, it seems highly unlikely that shareholders will get a cash payout in the near-term.”

Oil Rises Above $110

However, oil rebounded above the $110 mark, with benchmark Brent Crude trading at $111 per barrel. Shell and BP shares rose 1.4% to 2,105.5p and 1.9% to 390.5p on the higher prices, respectively.

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