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FTSE 100 Index Set to Suffer From Weak Chinese Demand

FTSE 100 Index Set to Suffer From Weak Chinese Demand

Martin Essex, MSTA, Analyst

FTSE 100 price, news and analysis:

  • The FTSE 100 index of London-listed stocks reflects global economic conditions rather than the UK economy, and that makes it particularly susceptible to a global slowdown.
  • In particular, the heavy weighting of mining and energy stocks could lead to underperformance against other major stock indexes.

China slowdown puts FTSE 100 under pressure

The FTSE 100 index of leading London-listed stocks is set to suffer more than most other stock indexes from fears of a global economic slowdown because of the large number of mining and energy stocks among the companies included in it.

Data released Wednesday showed the the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for China in December fell to 49.7 from 50.2 in November, marking the first contraction since May 2017.

That is a worry for the FTSE 100 mining and energy constituents such as Anglo American, BHP Billiton, Rio Tinto, BP and Royal Dutch Shell as exports to China will likely fall if the Chinese slowdown continues.

FTSE 100 Price Chart, Daily Timeframe (May 10, 2018 – January 2, 2019)

Latest FTSE 100 index price chart.

Chart by IG (You can click on it for a larger image)

In London, the index was down by 0.8% late morning, hit by losses of more than 4% for Anglo American, Antofagasta and Glencore. That pushed it closer to the December 27 low of 6,536.53, which is a likely target for bearish investors.

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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