The FTSE 100 starts a new week in a similar fashion to the way if finished the previous one as the index drops firmly below 7,000 to its lowest level since July, dragged down by the mining sector.
“There’s plenty for the market to fret about and those arguing the markets were looking frothy are seeing some of that froth disappear as a brewing crisis in China, surging gas prices in Europe and concerns about stagflation combine to sink stocks.
“The ‘don’t panic’ message from the Government on energy prices is starting to sound worryingly like Corporal Jones from Dad’s Army as the UK faces a whirlwind whipped up by low levels of energy storage, huge global demand for LNG and Vladimir Putin’s machinations as the amount of gas pumped from Russia is constrained,” says AJ Bell investment director Russ Mould.
“The fear is that in adding to inflationary pressures it could threaten the UK’s recovery from the pandemic.
“More significant from the perspective of world markets is the concerning situation with huge Chinese property developer Evergrande which appears to be teetering on the precipice with concerns about contagion from the situation infecting the wider economy in China.
“This is particularly bad news for miners. Any downturn in China would have significant implications for commodities demand given its status as the world’s largest consumer of many minerals and metals. The situation also has uncomfortable echoes of 2015 when fears about Chinese debt prompted a big and broad-based market correction.
“A combination of inflation and a global slowdown, namely stagflation, is the big fear stalking investors and this will need to be addressed if the markets are to recover their poise.”