The FTSE 100 fell on Monday as fears around China hit the natural resources sector and sapped confidence from London’s Bluechip index.
We wrote last week that confirmation of the Bank of England’s and Federal Reserve’s decisions to keep interest steady at the current level would swiftly see attention shift back to global growth.
And that it did on Monday. Concerns about China swept over markets sending the FTSE 100 0.9% lower in early trade.
China has shown some signs of positivity in recent weeks after consumer prices surprised to the upside and returned to inflation, while manufacturing data came in slightly better.
However, any hopes China was on a better footing were dashed over the weekend by more bad news from the Chinese property sector.
“China is set to go down in history as being 2023’s biggest disappointment for investors. Having started the year in everyone’s good books amid expectations of a big economic rebound, the Asian superpower has failed to deliver. Economic growth has become a struggle compared to the levels it generated a decade ago and government stimulus initiatives have lacked bite,” said Russ Mould, investment director at AJ Bell.
“The property sector has been at the centre of the country’s troubles and it’s going from bad to worse. Evergrande is back centre stage after saying it was struggling with its debt restructuring plan following poorer-than-expected sales, causing its shares to dive and taking the Hang Seng index down for the ride. The index’s real estate sector fell by 2.5% on the day, with Evergrande’s shares down by a quarter at one point.
“The property sector is very important to China’s economy and therefore associated problems will weigh on the stock market. Investors are losing faith in China and this situation is only going to make matters worse for the markets.
“Anything bad in China typically has a negative knock-on effect to UK-listed diversified mining stocks, explaining why Rio Tinto and Anglo American were among the top fallers on the FTSE 100.”
Sentiment was hit across Europe and major indices were trading deep in the red on Monday. The German DAX was down 0.76% while the French CAC gave up 0.67%.
FTSE 100 gainers were few and far between. The top riser was CRH who announced the shift of their primary listing to the NYSE.
Entain was the FTSE 100’s biggest casualty with a drop of 11% after the gambling group said adverse sporting results hit margins during September and they saw slower growth in Australia and Italy.