The FTSE 100 slipped beneath 7,000 on Tuesday feeling the impact of negative reactions to earnings updates from blue chips.
HSBC and Whitbread issued warnings on the economic environment pointing to inflationary pressures and headwinds which tarnished otherwise solid reports.
Indeed, both companies produced remarkably good revenue figures – but investors were more concerned with the outlook.
HSBC also said the Chinese real estate sector was a factor behind increased provisions for bad debts. HSBC shares were the FTSE 100’s top faller shedding over 7% at the time of writing.
“Concern about the impact of a slowing economy on bad debts and growth in the loan book is being exacerbated at HSBC by the departure of well-respected finance director Ewen Stevenson and the deteriorating situation in China,” said AJ Bell financial analyst, Danni Hewson.
Chinese exposure
One would be forgiven for thinking the FTSE 100’s performance is more a representation of the Chinese economy than it is the UK’s – and today is a perfect demonstration.
On a day the new UK Prime Minister sets about the jobs of increasing confidence in UK assets, the FTSE 100 falls due to concerns around the health of the Chinese real estate sector and overall Chinese economy.
Following disappointing Chinese retail sales data yesterday, HSBC raised concerns about the outlook of the property sector. This sent waves through FTSE 100 miners, and Standard Chartered who are reporting tomorrow.
Standard Chartered was down 4% while Rio Tinto, Anglo American and Antofagasta all sank, dragging the FTSE 100 with them.
Bargain hunting
The losses in stocks exposed to China was marginally offset by strength in many companies who have experienced a torrid 2022.
B&M European Value, down 50% year-to-date, gained 2.3% while JD Sports looked set to break a 6-day losing streak. JD Sports are down 55% year-to-date.