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FTSE 100 close: Wilting Chinese recovery keeps London mining giants lower

Over the course of the week it has gained 2.7 per cent, its strongest performance all year.
Over the course of the week it has gained 2.7 per cent, its strongest performance all year.

London’s FTSE 100 sagged today, dragged lower by industrial firms tumbling in response to signs that China’s economic recovery is running out of steam.

The capital’s premier index shed 1.03 per cent to close at 7,442.11 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.76 per cent to 18,393.33 points.

Some of Britain’s largest mining and raw material companies suffered steep losses during opening exchanges in the City today on the prospect of a huge source of demand for their products wilting.

Numbers from Caixin showed activity in the Chinese services economy slipped to 53.9 in June from 57.1 in May, the lowest reading since January when Covid-19 cases galloped higher after restrictions were rolled back.

That downbeat reading reinforced signs from the separate manufacturing purchasing managers’ index out earlier this week that activity is on a downward trend, indicating the world’s second largest economy’s rehabilitation from years of blanket lockdown measures is running out of rope.

‘’There are fresh concerns about the global economy powering down as data from China’s service sector underlines how tepid the post-pandemic recovery has become,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.

Signals that China could become a less prosperous source of revenue put downward pressure on FTSE 100 miners’ share prices today.

Anglo American tumbled 2.72 per cent, while Antofagasta lost 2.16 per cent. Fresnillo was also lower.

Industrial firms represent a big chunk of the FTSE 100, meaning movements in their respective share prices have a heavy influence over the direction of the premier index.

Rising mortgage rates also crimped FTSE 100-listed housebuilders today. Data from Moneyfacts yesterday showed the rate on the 5-year fixed mortgage climbed above six per cent for the first time this year.

Banks have been passing on rising rates on financial markets. Traders have been betting the Bank of England will lift interest rates above six per cent to tame sticky inflation.

Pound sterling weakened slightly against the US dollar, which should not normally happen in a country where borrowing costs are on the up. It has risen sharply against the greenback this year.

Oil prices were mixed. WTI jumped just over three per cent, while brent crude only nudged higher.