FTSE 100 retreated from the verge of breaching all time record highs on Thursday following an instalment of Chinese economic data stopped the rally in its tracks.
The Footsie fell 0.3% after confirmation the Chinese economy grew just 3% in 2022.
The 3% growth rate was better than some estimates but still the second worst level of growth since the 1970s. Stringent COVID restriction closed large portions of the Chinese economy in 2022 and a softer growth rate verifies the negative impact of the policy.
“The FTSE 100 fell just short of its record highest close on Monday night and was treading water on Tuesday after Chinese fourth quarter growth figures showed the impact Covid had on the world’s second largest economy,” said AJ Bell investment director Russ Mould.
“China has particular influence over the FTSE 100 thanks to a heavy weighting for commodity stocks of which the country is a rapacious consumer. Rio Tinto’s latest update saw the miner warn of potential supply chain issues and labour shortages in China.”
Anticipation around a Chinese reopening has helped lift global stocks and the data has likely spurred a bout of profit taking, as opposed to instilling concerns about the outlook for the Chinese economy in 2023.
The FTSE 100’s miners were mixed in early afternoon trade on Tuesday with Rio Tinto gaining and Glencore trading down 1.5%.
UK wages and interest rates
Ocado was the biggest faller on Tuesday after the online retailer said average basket values fell and showed little signs of profitability in the short term. Ocado shares were down 7% at the time of writing.
However, the main drag on the FTSE 100 was a raft of UK domestic-facing stocks reacting to the news of record wage growth, and prospect of more interest hikes by the Bank of England.
Retails stocks JD Sports, Sainsbury’s, Next and Fraser Group fell in sympathy with Ocado and on the possibility of further pain for households, if rates are hiked further.
Berkeley Group was down 2.5% a day after directors sold notable stakes in the housebuilder while Persimmon dipped 0.7%.