Fears of Chinese recovery faltering add to investors’ timid mood
THE risk-averse mood of London investors continued today as more evidence of China’s cooling Covid recovery deepened worries over the global outlook.
Asia markets fell sharply and the FTSE 100 index lost another 21.42 points to 7500.65 after the world’s second largest economy reported a miss on manufacturing activity.
The May factory update highlights an increasingly uneven recovery in China’s economy, with separate figures showing the softest pace for services growth since January.
The Hang Seng index closed more than 2% lower in Hong Kong, a performance that set the tone for losses of more than 2% for Asia-focused lender Standard Chartered and luxury goods group Burberry in London’s FTSE 100 index.
The selling pressure comes with traders still uncertain about whether the Biden-McCarthy debt ceiling deal will get through Congress before the June 5 default deadline. Hargreaves Lansdown analyst Susannah Streeter said: “Far from being the powerhouse which will offset America’s slowdown, China’s economic recovery from the pandemic is looking more precarious.”
Economic nerves have been reflected in this week’s oil price after Brent Crude futures slumped 4% yesterday and dipped below $73 a barrel today. This contributed to BP shares weakening 4.2p to 462.45p and Shell losing 18p to 2264p.
European stock markets also retreated to their lowest level in two months, despite France’s steeper-than-expected drop in its inflation rate to 5.1%.
Favoured stocks in London’s top flight included those in the utilities sector after gains of more than 1% for SSE and Centrica, while Vodafone came off last night’s multi-year low with a rise of 0.9p to 78.6p.
The AI-driven momentum behind yesterday’s latest year-to-date high for the Nasdaq Composite benefited FTSE 100-listed tech investor Scottish Mortgage as its shares continued their recent rise, gaining 6.5p to 679.7p.
The FTSE 250 index weakened 45.70 points to 18,761.67, with Drax shares down 4% or 24p to 565.8p after Ofgem announced it was looking at the biomass energy generator’s reporting under the Renewables Obligation scheme. The regulator said the opening of an investigation does not imply any finding of non-compliance.