Protests in China against Covid-19 lockdown restrictions served as a reminder of the political and economic difficulties faced by the world’s second largest economy, sending stocks lower globally on Monday.
The FTSE 100 index opened down 36.88 points, 0.5%, at 7,449.79. The FTSE 250 was down 45.13 points, 0.2%, at 19,500.57. The AIM All-Share, meanwhile, was up just 0.41 of a point at 847.48.
The Cboe UK 100 was down 0.6% at 745.05, the Cboe UK 250 was flat at 16,912.30, and the Cboe Small Companies was down 0.5% at 13,103.85.
The scenes in China also promoted a weaker open in European equities on Monday. The CAC 40 index in Paris was down 0.4% and the DAX 40 in Frankfurt was down 0.2%.
Sunday saw people take to the streets in several major cities across China to call for an end to lockdowns and greater political freedoms, in a wave of nationwide protests not seen since pro-democracy rallies in 1989 were crushed.
A deadly fire last week in Urumqi, the capital of northwest China’s Xinjiang region, has become a catalyst for public anger, with many blaming Covid lockdowns for hampering rescue efforts.
But they have also featured prominent calls for greater political freedoms - with some even demanding the resignation of China’s President Xi Jinping, recently re-appointed to an unprecedented third term as the country’s leader.
Asian stocks closed in the red on Monday. In China, the Shanghai Composite closed down 0.8%, and the Hang Seng in Hong Kong closed down 1.6%. The Nikkei 225 in Tokyo ended 0.4% lower. The S&P/ASX 200 in Sydney also closed down 0.4%.
‘China is a rapacious consumer of global commodities and signs economic activity is being disrupted by the mounting dissent in the country will be seen as negative for demand,’ said AJ Bell investment director Russ Mould. ‘It’s worth noting that unrest is already affecting business in China including Apple which has seen violent clashes at one of its facilities in Zhengzhou.’
In London, Persimmon was down 2.0% after UBS cut the housebuilder to ’sell’ from ’neutral’ with a price target of 1,230 pence.
Persimmon and other housebuilders also came under pressure as Zoopla reported that UK homes have been selling for 3% below their asking price typically in recent weeks.
For much of 2021 and the first half of 2022, the average discount that homes were selling for was 0%, it said, meaning that properties were typically achieving their asking price. The property website said it expects discounts to increase further in 2023.
Barratt Developments, Bellway and Vistry all were down 0.7%, Berkeley and Taylor Wimpey were down 0.5%, and Redrow was down 0.4%.
Rio Tinto was down 1.5%. The miner said it has agreed to create the Juukan Gorge Legacy Foundation after signing a remedy agreement for the destruction of two ancient rock shelters at Juukan Gorge in Western Australia by the miner in 2020.
Under the agreement, Rio Tinto will provide financial support to the foundation to progress cultural and social projects including a new keeping place for storage of important cultural materials.
In FTSE 250, Home REIT was down 8.4%. On Friday the real estate investment trust announced a delay to the release of its full-year results for the year ended August 31.
Chair Marlene Wood said the delay was due to the ‘actions of Viceroy’ which released a report on Home REIT on Wednesday.
Viceroy on Wednesday said its investigation pointed to a ‘significant downside’ for Home REIT. It claimed several of Home REIT’s largest tenant ‘do not appear to be paying any rent’, alleging that ‘financial accounts show zero outflow’.
Home REIT called the report ‘inaccurate and misleading’.
Just Group rose 4.6% after Jefferies started the retirement financial services provider with ’buy’ with a price target of 115 pence.
On AIM, Windar Photonics soared 90% as its shares resumed trading following the publication of both of its full-year and interim results.
The results, released on Friday, showed that the wind sensor developer for wind turbines narrowed its pretax loss in the six months ended June 30 to €880,317 from €962,340 the previous year.
Its revenue in the period rose to €420,555 from €305,991. The majority of this revenue was realised in June, it said, when initial deliveries to Vestas Service North America ‘finally’ began.
The pound was quoted at $1.2071 early Monday in London, down from $1.2090 at the London equities close on Friday.
‘Clearly, sterling trading conditions have settled down even as recession expectations solidify. Our view is that these GBP/USD gains will not last, and we would not be surprised to see fresh selling interest emerging near the 200-day moving average at 1.2177 or at best the 50% retracement of the 2021-22 drop - at 1.2300,’ said Chris Turner at ING.
UK Energy Secretary Grant Shapps confirmed a £1 billion scheme to make middle-income homes more energy efficient is being launched along with a public information campaign advising people how to cut power usage.
Labour criticised it as a ‘reheated announcement with no new resources’ that comes ‘far too little too late’.
Hundreds of thousands of households could receive loft and cavity wall insulation under the scheme running for three years from spring. It is predominantly being targeted at households that do not currently get support to upgrade homes, though a fifth of the funding will be targeted at the most vulnerable.
The euro stood at $1.0394 shortly after the European equities open on Monday morning, flat against $1.0395 late Friday. Against the yen, the dollar was trading at JP¥138.17, down from JP¥139.22.
Gold fetched $1,753.57 an ounce, up from $1,750.96.
Brent oil was quoted at $81.28 a barrel early Monday, down sharply from $85.21 late Friday as China’s unrest clouded the outlook for energy demand. Oil majors BP and Shell were down 2.0% and 1.6%, respectively, as a result.
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