FTSE 100 slumps on UK credit rating downgrade as Hong Kong violence hits Asian stocks
The FTSE 100 index slumped this morning after Moody’s downgraded its outlook on the UK’s credit rating, while global stocks took a hit on continued uncertainty over US and China trade talks and escalating violence in Hong Kong.
The FTSE 100 fell as much as 1.19 per cent this morning to 7,271.5 points.
London’s blue-chip index was dragged down by the poor performance of Evraz, Rolls-Royce, Anglo American, Glencore and NMC Health, handing back most of the gains it accumulated last week.
Read more: Hong Kong falls into recession amid ongoing unrest
The FTSE 250 index was down 0.16 per cent after Moody’s downgraded the UK’s credit rating from “stable” to “negative” due to the ongoing political uncertainty caused by Brexit and the upcoming general election.
Connor Campbell, financial analyst at Spreadex, said: “The likes of Barclays, Lloyds, Standard Chartered and RBS have likely been hurt by Moody’s downgrading of its outlook on the UK’s current credit rating from ‘stable’ to ‘negative’, highlighting the country’s ‘paralysis in policy-making’ as Brexit continues to suck air out of the room.”
FTSE 100: Five biggest fallers
- Evraz minus 5.7 per cent to 349.6p
- Glencore minus 4.1 per cent to 243.9p
- Antofagasta minus 3.6 per cent to 899p
- NMC Health minus 3.5 per cent to 2,238p
- Rio Tinto minus 3.4 per cent to 4,063p
FTSE 100: Five biggest risers
- Persimmon 2 per cent to 2,405p
- RBS 1.9 per cent to 217p
- Lloyds 1.8 per cent to 57.3p
- Barratt Developments 1.7 per cent to 637.6p
- Berkeley Group 1.4 per cent to 4,513p
Meanwhile the FTSE 100’s losses were compounded by Nigel Farage’s decision that his Brexit Party will not contest 317 Tory-held seats at December’s General Election.
“The FTSE 100 was already being hammered and endured further losses on the news to touch 7260,” Markets.com’s chief market analyst, Neil Wilson, said.
That’s because the announcement sent the pound surging, up 0.8 per cent to $1.287 as the stronger currency hit the FTSE’s exporters.
The lingering uncertainty over a potential trade deal between the US and China has also had a knock on effect on UK stocks.
“President Trump’s statement over the weekend that he had not personally approved any roll-back of tariffs on Chinese goods going into America appears to have shaken the optimism that has characterised trading for the past few weeks,” Russ Mould, investment director at AJ Bell said.
“This can be seen in how the largest fallers in the FTSE 100 are the miners, such as Evraz, Glencore, Anglo American and Antofagasta, where demand for their raw materials are tied closely to the global economic cycle.
“Hopes are running high that Washington and Beijing will soon come to at least ‘phase one’ of an accord that in turn helps to boost global growth as uncertainty is lifted and supply chains are cleared.
“But hope is not a strategy and the difficulty for investors is that Presidents Trump and Xi have been promising a deal since the G20 meeting in Buenos Aires a year ago. If the talks falter then that the current optimistic mood could be punctured, even if central banks are doing their best to lift spirits with interest rates cuts and, in the case of the US Federal Reserve and European Central Bank, provide further cheap liquidity through intervention in interbank lending and Government bond markets.”
Meanwhile, Asian stocks sank overnight due to escalating violence in Hong Kong/
Hong Kong’s Hang Seng Index slumped 2.79 per cent this morning after police fired into a crowd, shooting at least one protester, who was in critical condition following the incident.
Japan’s Nikkei 225 fell 0.26 per cent and Shanghai’s SSE Composite Index sank 1.83 per cent.
Violence in Hong Kong continued into Monday after another weekend of unrest in the city, and the incident marks the third shooting since protests began months ago.
Protesters are angry about what they see as police brutality and overreach by Beijing threatening the former British colony’s freedoms.
“The focus is back on Hong Kong in Asia as a rare outbreak of Monday morning violence drove the Hang Seng lower, a move echoed by equity indices across the broader region,” Ian Williams, economics and strategy research analyst at Peel Hunt, said.
Renewed doubts over the prospects of a trade deal between the US and China also weighed on Asian stocks.
Read more: Hong Kong Stock Exchange boss questions “one country, two systems”
Over the weekend President Donald Trump said trade talks between the countries were moving along “very nicely”, but said he would only sign a deal if it was the right one for the US.
He added that there had been incorrect reporting about the US preparing to lift tariffs on China as part of a “phase one” agreement.
Main image credit: Getty