Just as developments in China drove declines in the FTSE 100 yesterday, on Tuesday, London’s leading index bounced back on reports that Chinese authorities were finally preparing to move to stimulate the economy.
China’s recovery from the pandemic has stalled, and market participants have been hoping for action to spur growth.
“After a poor start to the week as investors grew tired of waiting for the next stimulus initiative from China to boost its economy, Asia stocks rallied on Tuesday as investors got some of the news they wanted,” said Danni Hewson, head of financial analysis at AJ Bell.
“Reports suggested Beijing will provide more support, albeit details remain thin on the ground at present. It was enough to lift the Hang Seng by 4% and send investors scrambling to own shares in real estate, basic materials, technology and financial sectors.
“Good news from China always makes its way to the UK market in a flash, with commodity producers riding high including a 4% gain from Anglo American and Rio Tinto.”
Antofagasta was the FTSE 100 topr riser adding over 5% at the time of writing. Should China successfully stimulate the economy, demand for Antofagasta’s copper will be bolstered.
The FTSE 100 was 0.17% higher at 7,691 at the time of writing.
Investors will be looking forward to rate decisions from Federal Reserve and ECB later this week and the prospect of dovish tones from two central banks enjoying lower inflation rates.
Unilever
After releasing a respectable set of first-half results, Unilever was having its best session for months. Falling volumes were more than offset by rising prices, and revenue for the first half rose 2.7% to €30.4bn. The consumer group’s beauty and wellbeing unit was the standout performer, with growth of 8.6%.
“Decent headline sales growth across the business and an improvement in operating profit, operating margin and free cash flow helped to drive a 5% spike in Unilever’s share price at the market open. That was one of its strongest sessions on the stock market in a long time, helped by quarterly sales beating estimates,” Danni Hewson said.
“But dig deeper and there are several reasons not to get carried away.
“First, group sales growth has come entirely from putting up prices, not shifting more units of products. The sign of a good business is one that can grow prices and volumes. Unilever’s group volumes actually declined in both the first and second quarter periods.
“Second, chief executive Hein Schumacher is still new in the role and it’s easy to get excited when a new leader delivers messages of optimism.”
