Fears over China economy proves drag on the FTSE

COMMODITY stocks pulled the FTSE 100 lower on Thursday after disappointing manufacturing data from Beijing triggered fears over the health of the Chinese economy.

London’s blue-chip index closed down 32.47 points, or 0.46 per cent, at 7,074.73, while Germany’s DAX rose 0.29 per cent and France’s CAC grew 0.4 per cent.

David Madden, market analyst at CMC Markets, said: “The FTSE 100 is firmly in the red as a broad-based sell off in consumer, energy and mining stocks has weighed on the British index.

“China’s manufacturing PMI (Purchasing Managers’ Index) report fell further into contraction territory to 49.2 - its lowest reading since early 2016. The second-largest economy in the world is a major importer of commodities and that is a large factor in the FTSE 100’s underperformance.”

Meanwhile the pound, which has been a barometer of Brexit since the 2016 referendum, was weaker due to concerns over the Prime Minister’s ability to deliver a deal that will appeal to her Cabinet with just a month to go before Britain’s scheduled departure from the EU on March 29.

Sterling was down 0.18 per cent against the US dollar at 1.328 and declined 0.28 per cent versus the euro at 1.167 at the London market close.

Fiona Cincotta, senior market analyst at City Index, said: “Brexit continues to dominate sterling traders’ focus. Whilst a vote on no-deal Brexit and delaying Brexit are offering a solid floor to the pound, concerns over Theresa May’s ability to bring a more palatable deal to ministers was weighing on sentiment.

“With under two weeks to go until the meaningful vote, a Government spokesman has said there is still significant work to be done.”

In corporate news, luxury car manufacturer Aston Martin Lagonda revealed plans to set aside up to £30m to help it weather Brexit disruption as it posted a £68.2m annual loss.

The maker of cars favoured by spy James Bond said its board had given the go-ahead for the fund as it steps up contingency planning for a possible no-deal Brexit.

Aston Martin shares closed down 294.4p to 1,080p.

Rolls-Royce pulled out of the race to build engines for Boeing’s new mid-sized planes as it revealed the bill for problems on its Trent 1000 turbines would rise to a mammoth £1.5 billion.

The group said it was withdrawing from the competition to power the new Boeing planes, saying it was “unable to commit to the proposed timetable”.

Rolls-Royce shares rose 27.8p to 955p.

British Airways owner International Consolidated Airlines Group (IAG) posted higher revenue and profit despite an adverse impact from foreign exchange rates and higher fuel costs.

The company reported a 6.7 per cent increase in revenue to 24.4 billion euros (320.88 billion) for 2018, while profit before tax rose 9.8 per cent to 3.04 billion euros (£2.6 billion).

IAG shares were up 1.2p to 599p.

Rentokil Initial said a surge in summer call-outs for insect and rat catching helped boost annual results as last year’s heatwave sent pest numbers soaring.

Rentokil shares were up 22p to 351p.

The biggest risers on the FTSE 100 were Rentokil up 22p to 351p, and St James’s Place up 31.2p to 972.4p.

The biggest fallers on the FTSE 100 were easyJet down 84p to 1,227.5p, and Mondi down 116.5p to 1,728.5p.