The FTSE 100 started September in the red, tumbling as much 1.5% in early trading on Thursday as cyclical stocks sank.
A weakened Pound Sterling couldn’t save the blue chip index from sliding, as the currency fell on a report from the Resolution Foundation warning of the worst outlook for UK living standards in a century.
“The start of September has not brought about any change to the current gloomy mood pervading markets,” said AJ Bell investment director Russ Mould.
“Not even further weakness in the pound, as the Resolution Foundation warns of a ‘frankly terrifying’ outlook for living standards, can spare the FTSE 100 from the pain.”
Commodities firms plummet
Commodities firms plummeted to the bottom of the FTSE 100, after Chinese city Chengdu entered the largest Covid lockdown for the country since Shanghai’s shutdown earlier in the year.
The news added to significant concerns over the country’s productivity following two months of weak PMI reports, as fears over a lack of commodities demand sent the top mining giants spiralling.
Glencore shares fell 7% to 439.8p, with Anglo American dropping 3.3% to 2,689p, Endeavor Mining sliding 4.6% to 1,605.5p, Antofagasta declining 3.4% to 1,063.5p, Fresnillo dropping 3.3% to 665p, Rio Tinto decreasing 3.5% to 4,604p and Croda dipping 2.3% to 6,569p.
Reckitt Benckiser CEO resigns
Reckitt Benckiser shares fell 4.3% to 6,357p after CEO Laxman Narasimhan announced his sudden exit from the consumer goods company.
“Investors in Reckitt Benckiser are clearly disappointed by the unexpected – and very rapid – departure of chief executive officer Laxman Narasimhan, judging by the share price slide in early trading,” said Mould.
“Mr Narasimhan cites the opportunity to take up a post in the USA after just three years in the role.”
“By the time of his departure at the end of month, Mr. Narasimhan will have completed just over three years in office, well below the 5.8-year average across the FTSE 100.”
US and Asian markets sink
Markets looked bleak in the US and Asia, as the US apparently banned the sale of NVIDIA micro-chips to China and Russia, adding fuel to the geopolitical fire.
“Further weakness in the US and Asia, with the rally of early August an increasingly distant memory, set the stage for selling in Europe,” said Mould.
“Reports of the US banning the sale of micro-chips by NVIDIA to China and Russia helps move geo-political risks up another notch on the dial.”
“The US CPI reading for July gave cause for comfort but, at present, it is hard to see where the next piece of positive data which could offer some relief to investors is coming from.”
Markets sank across the Atlantic, with the Dow Jones sliding 0.6% to 31,333, the S&P 500 dropping 0.7% to 3,927 and the NASDAQ falling 1% to 12,154.5 in pre-open trading.
Asian indices seemed similarly glum, with the Hang Seng down 1.7% to 19,597.3 and the Shanghai SSE sliding 0.5% to 3,184.9.
“It’s still a couple of weeks before we get the CPI reading from across the Atlantic for August. Perhaps if that showed the softening of inflationary pressures to be more of a pronounced trend it might boost sentiment and see the Federal Reserve ease up on its hawkish rhetoric,” said Mould.
“For now, the swift reversal in fortunes for stocks will add grist to the mill for those arguing their recovery a few weeks ago represented nothing more than a ‘bear market rally’.”