Market report: FTSE 100 lacking Monday motivation as China concerns persist
Susannah Streeter, head of money and markets Hargreaves Lansdown: “The FTSE 100 is short of Monday motivation, opening lower in early trade, despite indications of a more resilient outlook for the UK, as concerns about China’s economy linger. Energy giants have climbed on a recovery in oil prices, but mining giants are on the backfoot amid concerns about demand. On Wall Street investors have been seeing signs of robustness in the US as a good news story, indicating a softer landing for the US, even though possibilities of early interest rate cuts have retreated a little. With the key monthly jobs snapshot coming in stronger than expected but inflation still heading in the right direction, the Goldilocks scenario being yearned for is potentially still on the cards. There still could be some ogres appearing on the horizon as the effect of rapid tightening of rates continues to feed through, but right now there is optimism in the air.
Positivity over UK economic prospects
There is a whiff more hope in the air for the prospects for the UK economy after surveys indicated a resurgence of output. The latest manufacturing survey from BDO and Make UK indicated that it jumped in the fourth quarter, indicating renewed confidence. The closely watched Lloyds Bank survey also showed that activity as bouncing back in half the sectors it tracks. 7 out of 14 sectors saw a boost in November with the car manufacturers and autoparts makers showing the fastest uptick of any sector.
Oil price gains
The pulse of positivity about the outlook for the US and the UK has helped push up oil prices. It offers respite for the commodity which had been posting the longest streak of weekly falls in almost five years. Brent crude has found stronger form since Friday, climbing back up above $76 a barrel after hitting $73 on Thursday. However, gains are likely to be held back particularly with concerns about demand in China, the world’s second-largest economy.
China’s deflation concerns
The latest data showing China is sinking deeper into deflationary territory is raising fresh concerns about persistently weak domestic demand, amid plummeting food prices. Consumer prices fell 0.5% year on year in November and what will be a particular worry is that signs of fragility are now starting to be felt in the service sector. Although prices here were still rising by 1% in the year to November, that was down from 1.2% in October. With global growth expected to slow further in 2024, there will be little support coming from overseas, while the property market’s woes keep consumer confidence subdued. The clamour for a big bazooka of stimulus is growing to restore vigour to the economy. Authorities also have their eye on debt laden local authorities which pose another risk to financial stability. Hopes are being focused on the Central Economic Work Conference later this month for more medicine to try and put the economy on the road to better health.’’
