FTSE 100 falls as consumer, commodity stocks drag on China COVID worries


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UK’s FTSE 100 fell on Thursday, with energy and consumer stocks leading declines, as optimism over China’s reopening fizzled out in the face of surging COVID-19 cases in the world’s second largest economy.

The blue-chip index, down 0.4%, will post its biggest single day drop in two weeks if losses hold. The domestically focused FTSE 250 lost 0.3%.

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Commodity prices broadly fell as surging COVID cases in China dimmed hopes of a recovery in fuel demand for the world’s largest crude oil importer even as it began dismantling strict COVID curbs.

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“The UK has a lot of commodity exporting companies, so they are really influenced by the outlook for China,” said Patrick Armstrong, chief investment officer at Plurimi Wealth.

Higher commodity prices and a weaker sterling have helped the FTSE 100 outperform its European and U.S. peers this year, with the former rising 0.9% while Europe’s STOXX 600 has lost 12.4% and the U.S. S&P 500 has shed 20.6%.

However, the risk of a recession, soaring inflation, a series of interest rate hikes and political instability have all weighed down the UK midcap index, which has lost 19.9% this year.

“The consumers have to deal with higher energy bills, mortgage and food costs and Bank of England has been hiking rates, that is going to have an impact on the job market at some point,” added Armstrong.

The Bank of England (BoE) opted for a smaller rate hike in December than previous meetings, although the central bank said more rate increases will be needed to help bring inflation down to target.

Oil majors BP and Shell lost 1.2% and 0.8%, respectively, on Thursday as crude prices fell more than 2%.

Consumer stocks such Unilever and British American Tobacco weighed on the FTSE 100, slipping nearly 1%. (Reporting by Shashwat Chauhan in Bengaluru Editing by Vinay Dwivedi)


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