FTSE 100 falls as consumption and commodities stocks lag in China on COVID worries

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The UK’s FTSE 100 fell on Thursday, with energy and consumer stocks leading the decline, as optimism over China’s reopening plummeted amid surging COVID-19 cases in the second largest economy in the world.

The blue-chip index, down 0.4%, will post its biggest single-day drop in two weeks if the losses continue. The domestically focused FTSE 250 lost 0.3%.

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Commodity prices fell sharply as China’s spike in COVID cases dimmed hopes of a recovery in fuel demand for the world’s largest crude oil importer, even as it began to dismantling strict COVID restrictions.

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« The UK has a lot of commodity exporting companies, so they’re really influenced by the outlook for China, » said Patrick Armstrong, chief investment officer at Plurimi Wealth.

Rising commodity prices and a weaker pound have helped the FTSE 100 outperform its European and US peers this year, with the former rising 0.9% while the European STOXX 600 lost 12.4% and the US S&P 500 lost 20.6%.

However, the risk of recession, soaring inflation, a series of interest rate hikes and political instability have all weighed on the UK mid-cap index, which has lost 19.9% ​​this year.

“Consumers are facing higher energy bills, mortgages and food and the Bank of England has raised rates which will impact the labor market at some point,” added Armstrong.

The Bank of England (BoE) opted for a lower rate hike in December than in previous meetings, although the central bank said more rate hikes would be needed to help bring inflation back down. purpose.

Oil majors BP and Shell fell 1.2% and 0.8% respectively on Thursday as crude prices fell more than 2%.

Consumer stocks like Unilever and British American Tobacco weighed on the FTSE 100, falling almost 1%. (Reporting by Shashwat Chauhan in Bengaluru Editing by Vinay Dwivedi)