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FTSE 100 close: Slowing China economy sends London index into red as Barclays and NatWest jump

"Market sentiment is being buoyed by better-than-expected retail sales," Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.
"Market sentiment is being buoyed by better-than-expected retail sales," Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

London’s FTSE 100 kicked off a fresh week today in downbeat fashion, dragged lower by signs that China’s economic recovery from the pandemic is whittling away.

The capital’s premier index shed 0.38 per cent to close at 7,406.43 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.87 per cent to 18,404.43 points.

Numbers out this morning from Beijing showed growth in the world’s second largest economy is stalling, with gross domestic product up just 0.8 per cent in the three months to June, down from an expansion rate of just over two per cent in the first quarter of 2023.

Growth was weaker than analysts expected, mainly caused by exports slumping and the real estate sector cooling.

Global demand is thinning owing to high inflation and central banks’ efforts to tame it with interest rate rises, weighing on spending for goods manufactured in China.

On an annual basis, Chinese growth was punchier, though the nearer term figures signal the rebound is fraying.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The FTSE 100 has relinquished some of the gains it accumulated last week on weaker-than-expected Chinese economic data.”

“China’s GDP rose 6.3 per cent, which was higher than last quarter but some way below expectations. The sheer scale of China’s economy means a perceived stalling in the post-pandemic recovery has ramifications for global demand and economies.”

FTSE 100 listed industrial giants, who generate a big chunk of their overseas revenue in Asia, were weaker this morning. China is the world’s largest commodity consumer.

Anglo American slid 2.49 per cent, while Glencore tumbled 2.82 per cent. Antofagasta was also down over two per cent.

Britain’s largest banks helped offset losses in the City, likely due to traders expecting the Bank of England to keep lifting interest rates to tame inflation. New ONS numbers on Wednesday are expected to show living costs are still rising sharply, up 8.2 per cent annually.

NatWest, Barclays, Lloyds and HSBC all closed near the FTSE 100’s summit.

Pound sterling weakened 0.12 per cent against the US dollar. It is up more than eight per cent against the greenback so far this year.

Oil prices scaled around 1.2 per cent lower.