The FTSE 100 was deep in the red on Monday despite another bumper rally in Asian equities overnight, as hopes about stimulus pushed Chinese stocks further higher.
However, a storming session in China didn’t translate into a strong session for London and the rest of Europe, as the FTSE 100 dropped 0.6%.
Investors were more concerned about a downward revision of UK GDP growth over the spring, suggesting a gloomier picture for the UK economy than we had first thought.
“In the UK, ahead of a crunch Budget in a month’s time, the Office for National Statistics revised down its estimate of growth in the three months to 30 June to 0.5% from the previous 0.6%,” AJ Bell’s Russ Mould said.
The downgrade weighed on sentiment despite some analysts highlighting that slow growth may spur additional action by the Bank of England to support growth through rate cuts. There was also nagging concern about developments in the Middle East after escalation over the weekend.
“Sentiment is subdued amid heightened tensions in the Middle East and a revision downwards of UK growth for the second quarter. However, although this latest snapshot of the UK economy doesn’t, on the face of it, look inspiring, it may bolster the case for further interest rate cuts,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Stocks reliant on the UK consumer were among the top fallers on Monday, with Frasers Group, IAG and Easyjet feeling the pinch of slower UK growth. UK banks, including Barclays, were also sold off by investors after the data.
Rightmove was the top faller after confirming it had turned down a fourth offer from Rupert Murdoch’s REA Group. Rightmove shares were down 6% at the time of writing.
In a statement released on Monday, Rightmove said:
“The Board has unanimously concluded that the Latest Proposal is unattractive and materially undervalues Rightmove. The Board has concluded that shareholder interests would be better served through the execution of Rightmove’s standalone strategic plan, with the multiple paths for long-term value creation which were laid out at the Capital Markets Day in November 2023.”
Although the FTSE 100 was weaker, commodities companies showed some strength amid the rally in China and rebound in oil prices. BP, Shell and Rio Tinto were all higher by around 1%.