The FTSE 100 failed to hold onto early gains on Tuesday as a commodities-driven rally faded as the session progressed.
Optimism around additional Chinese stimulus helped the FTSE 100 trade as much as 0.5% higher in early trade. However, the gains proved unsustainable, and the index swung to a 0.25% loss in the afternoon.
Miners Rio Tinto, Anglo American and Glencore received a boost from reports that Chinese authorities were preparing a fresh wave of stimulus to help a spluttering economic recovery. This boost had disappeared by Tuesday afternoon.
“Beijing’s number two, Premier Li Qiang, pointed to higher growth in the second quarter than the first and said the country would bring through policies to boost domestic demand,” said AJ Bell investment director Russ Mould.
“The pace of China’s Covid recovery has disappointed many but probably reflects the different nature of its pandemic experience.
“Households did not benefit from the same levels of support seen in the West and therefore hopes for a wave of ‘revenge spending’ in China were probably always going to be forlorn with an economic rebound likely to be more gradual.”
FTSE 100 movers
Ocado was the FTSE 100’s top riser a day after a fund chaired by former Chancellor Osborne took a 5% stake in the food technology company. Speculation Amazon were lining up a bid for the company would also be providing support for the price.
JD Sports was at the bottom of the FTSE 100 after saying growth had moderated in recent months. The sportswear group has enjoyed very respectable growth rates despite the economic backdrop. It appears JD Sports is not completely immune from cost pressures and shares were down over 5%.
“Terms like ‘softening in trade’ and ‘moderation in growth’ in JD Sports’ latest update go to show that even the most successful retail businesses can go through bad patches,” said Russ Mould.
“The trainers and athleisure seller recently got the market excited that it expects to exceed £1 billion in pre-tax profit this financial year, and it is sticking with that guidance despite pockets of weakness in its business.”
