An encouraging insight into China’s manufacturing sector helped lift the FTSE 100 on Monday, overcoming weakness in housebuilding shares after several downgrades in the sector.
London’s leading index was 0.3% higher at 8,315 at the time of writing as it broke through the 8,300 level convincingly for the first time since late October. Should 8,300 hold as support, traders may eye the next major resistance level around 8,400.
“Beijing’s economic stimulus effort seems to be having a positive effect, judging by better-than-expected manufacturing data from China,” says Dan Coatsworth, investment analyst at AJ Bell.
“The Caixin Manufacturing PMI data hit 51.5 in November against a forecast of 50.7%. The data sent Chinese shares flying, including a 1.1% rise in the Shanghai SEE Composite index. The big unknown is whether the stimulus efforts will have a long-lasting effect or just a short-term boost.
“The Chinese manufacturing data also needs to be viewed in the context of what’s happening in the US. The threat of punishing tariffs on Chinese goods imported into the US from January 2025 once Donald Trump returns to power is likely to have spurred factories to boost output ahead of the event. The theory being that some US customers might stockpile goods while they can buy cheaply before the threatened tariffs come into power.”
A positive session for mining names such as Rio Tinto and Anglo American – both up around 1% – was dampened by softness in the domestic-facing housebuilding sector after a string of broker downgrades hit Vistry, Persimmon and Taylor Wimpey despite Nationwide’s very encouraging house price data for November.
Average UK house prices rose 1.2% in November as first-time buyers scrambled to beat the changes to stamp duty due to be implemented in April 2025. House prices rose 3.7% in the year to November, the fastest annual growth rate in over two years.
However, the promising house price data was not enough to offset the impact of several broker downgrades, including RBC’s slashing of Persimmon’s price target to 1,275p. Vistry looks set to exit the FTSE 100 after RBC’s downgrade, which sent shares down by 4% and put the social housing-focused builder firmly in demotion territory.