UK shares opened sharply lower today with Britain’s biggest share index, FTSE, dropping 1.8 per cent following weaker-than-expected economic data from China.
London’s leading stock index fell more than 100 points to 6,620.71 this morning. European shares also started their first trading day of 2019 deep in negative territory as fears about global growth, trade wars, rising U.S. interest rates and political instability rolled over into the new year.
At 0908 GMT, euro zone stocks were retreating 1.6 percent with steep falls in Paris, down 2.2 percent, Madrid, down 1.7 per cent.
Fiona Cincotta, a senior market analyst at Cityindex commented: “It’s the first day back at the office for many big traders and fund managers and this will mean higher volumes and a re-positioning of portfolios, leading to some potential big swings in asset prices. The sell off in the London market followed on from selling overnight in Hong Kong, with the Hang Seng Index closing down 2.9% while China’s CSI coughed up 1.4%.”
“Much of the initial negative sentiment seems to be emerging from China: a Shanghai market close that sees it trading at March 2016 valuations is one issue, but this has been compounded by the release of the Caixin-Markit manufacturing purchasing managers’ index which has dropped below the crucial 50 point indicator, to demonstrate contraction in this sector for China.”
“While the trade war with the United States last year has played a role in putting the brakes on Chinese manufacturing there were already systemic signals that the country’s economy was starting to slow down before Trump’s election.”
“China’s growth has been a huge factor in the overall global economic growth story and its influence as a source of investment, credit and cheap manufacturing has been felt everywhere in the last 10 years. These numbers will be making investors nervous. Traders will be starting to watch to the gold price, which is trading at a six month high at $1285 and is a key indicator of the real fear in the global market.”