Market report

China lockdown may hit growth | Jobless figure falls


In London, the FTSE 100 clawed back early three-digit losses to close 17.77 points lower at 7,175.70 as commodity prices slid on concerns about rising coronavirus (COVID-19) cases in China.

Experts forecast a dent to economic growth as the latest Covid outbreak in China billows out, particularly after the authorities on Tuesday tightened anti-virus controls at ports, raising the risk of trade disruptions. 

“Renewed restrictions, notably the lockdown in Shenzhen, will weigh on consumption and cause supply disruptions in the near term,” Tommy Wu of Oxford Economics said in a briefing note.

He added that it will be “challenging” for China to meet its official 5.5% GDP growth target for the year.

Hong Kong stocks plunged by more than 6% today, extending the previous day’s tech-fuelled rout.

Dozens of domestic flights in Beijing and Shanghai were cancelled and aviation authorities said more than 100 international flights bound for Shanghai would be diverted to other Chinese cities between next week and 1 May. 

Investors weighed up the potential hit to corporate earnings and economic growth from new Covid lockdowns in China, particularly in the electronics manufacturing sector where disruption to production could lead to another supply chain crisis.

“A hard-line approach to Covid is not new for the country, but the resurgence in cases has provided a stark reminder that the pandemic is still lingering. Investors might have become too complacent over the risks of lockdowns returning once again,” said Russ Mould, investment director at AJ Bell.

“Disruption to the Chinese economy is not good news for commodity producers which have relied on the region to buy their metals and minerals for the past few decades. Heightened concerns explain why miners had a bad day on the market – and if they’re falling, you can be almost certain that the resources-heavy FTSE 100 will be dragged down.

Prudential’s sharpened focused on Asia saw its shares succumb to heavy selling as its growth plans are all about selling financial services to the wealthy.”

Unemployment falls

Britain’s unemployment rate fell more than expected to 3.9% in the three months to January, when the country was facing the Omicron wave of coronavirus, official figures showed today.

The figure was below forecasts in a Reuters poll for a drop to 4%.

The number of job vacancies hit a fresh record high in the three months to February at 1.3 million, underscoring the labour shortage facing many employers.

Chancellor Rishi Sunak insisted the figures showed the UK had bounced back more strongly than some had expected and was in a position to weather the “current global challenges”.  

British Chambers of Commerce head of economics, Suren Thiru, said: “Rising payroll employment and declining unemployment suggests that demand for workers remains robust despite growing headwinds.”

Russia-linked firms ousted from index

A number of Russia-linked companies will be deleted from the FTSE indices from next Monday due to insufficient liquidity following sanctions against the country.

The companies affected include steel maker and miner Evraz, precious metals miner Polymetal International, gold miner Petropavlovsk, and commercial real-estate investment company Raven Property Group.

Evraz and Polymetal were already due to be downgraded from the FTSE 100 to the FTSE 250 on Monday next week as part of FTSE Russell’s quarterly review.

Trading in Evraz shares has been suspended since late last week, after UK sanctions were applied to 29% shareholder Roman Abramovich.

Petropavlovsk currently is a FTSE 250 member.

New chair at Galliford Try

Alison Wood, a non-executive director at Capricorn Energy, has been named the next chair of construction company Galliford Try.

Full story here

SMS ahead of expectations

Smart Metering Systems, which installs and manages smart meters and other devices, said underlying profit for the year to the end of December rose 20% to £18.3m from £15.2m and by 58% on a like-for-like basis.

Full story here

Global markets

Financial market sentiment is likely to remain fragile as talks get under way on a potential ceasefire in Ukraine while shelling continues. Sharp falls in oil and gas prices also reflect a level of cautious optimism.

Overnight, the US tech-focused Nasdaq index fell by more than 2%, but the blue-chip Dow Jones was flat.

The Hang Seng in Hong Kong was down 4.2% and Shanghai Composite fell 3.3% as Covid restrictions were re-imposed in China.

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