The FTSE 100 has started the session higher but the gains didn’t last with concerns about the Chinese property sector dragging on the index as the session progressed.
Investors who thought we’d seen the last of worries about the Chinese property market had a rude awakening on Monday after fresh data showed Chinese house prices had fallen further as the downturn persisted.
“The property slump is also showing no signs of imminent reversal with the latest snapshot from the National Bureau of Statistics showing new home prices fell yet again in May by 4.3%, compared to a year earlier, with 67 cities reporting annual price falls,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Streeter continued to explain Chinese authorities were taking action to boost the housing market but the moves had little long-lasting imapct.
“Beijing is attempting to revive the real estate market, by encouraging local authorities to go on home buying sprees, but this data suggests it’ll just be a sticking plaster for a much deeper wound afflicting property sector. With home values falling, it’ll mean consumers’ wealth perceptions may also take a fresh knock, lead to more bargain hunting behaviour, increasing deflationary pressures in the economy,” Streeter said.
Miners were the obvious victims of concerns around China with Rio Tinto, Glencore and Anglo American all trading in the red. However, the gains were contained by hopes China would take action to stop the rot in the form of interest rate cuts later this week.
Russ Mould, investment director at AJ Bell, suggested the ‘alarming slump’ would “likely to put pressure on the Chinese central bank to cut rates when it meets later this week.”
London’s leading index was down just 4 points at 8,143 at the time of writing but had ranged between 8,187 and 8,120 during the session.
Weakness in miners was offset by a stronger session for UK house builders, financials and retail stocks. B&M was 2% higher, while St James’s Place added 2.4%. St James’s Place is due to be demoted to the FTSE 250 later this month.
