December 7, 2023

FTSE 100 Weighed Down By Growth Fears

On Wednesday, the blue-chip FTSE 100 index in the United Kingdom was weighed down by financial and commodity stocks over worries about a global economic growth slowdown.

However, losses in the exporter-heavy index were limited because of a weaker pound and a rise in the AVEVA Group over buyout news.

FTSE 100 index

The commodity-heavy FTSE 100 index declined by 0.2% for the third straight trading session, while the domestically-focused FTSE 250 index was able to reverse its earlier drop that had brought it to a low of five weeks.

A 27% gain was recorded in the AVEVA Group after Schneider, the French conglomerate that already owns 60% of the stake in the software firm announced that it was going to buy out minority shareholders.

The previous day, business surveys had been revealed, which showed that there was an increasing risk of the global economy moving towards a recession.

As for Britain, data showed that a decline in factory output had resulted in a slowdown in the private sector activity for the month of August.

The market analysts said that natural gas prices were once more reaching record highs in the UK and this was weighing down the FTSE 100 index and leading to negativity.

They added that people had come to the realization that there were some areas of the FTSE 100 index that would be affected negatively because of falling consumer incomes.

Interest rate

On Wednesday, there was a rise in wholesale prices of gas in Britain, which further worsened worries about a cost of living crisis that is already happening in the country.

Investors have already bet that the Bank of England (BoE) would increase the interest rate by another 50 basis points in the next month, with inflation already moving beyond the 10% mark.

Markets are also focused on the annual summit of Kansas City’s Federal Reserve in Jackson Hole, Wyoming, which is scheduled to begin on Thursday.

The US central bank has already asserted that it could possibly achieve a soft landing for the economy, but this does not seem to be likely for Europe.

Other stocks

Market analysts said that investors were mostly stressed because of the economic summit in Jackson Hole and what the Federal Reserve chairman Jerome Powell might say.

The comments could have an impact on the rates as well as the equity markets and this could get worse because the PMI data in Europe has already confirmed that Europe is not doing so well.

Amongst other stocks, there was a 1.9% dip in HSBC, after the Ping An Insurance Group in China defended its stance of spinning off the Asia business of the lender.

It stated that it was not an activist investor and its goal was to use its large stake for generating investment returns.

There was a more than 1% decline in oil majors Shell and BP because of the volatility recorded in crude prices. There was also a 1.9% drop recorded in miners for the day.

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