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FTSE bashed as companies suffer

by LLB Editor
27th Jul 21 11:37 am

A 1.2% decline in the FTSE 100 to 6,940 can be blamed on Reckitt’s disappointing trading update and weakness among mining stocks,” says Danni Hewson, financial analyst at AJ Bell.

“It’s no surprise to see Unilever fall in sympathy with Reckitt as investors are likely to be questioning the true defensive characteristics of these consumer goods companies. Yes, their products may be in demand during good and bad economic conditions, but that doesn’t mean profit margins can’t be squeezed.

“Sentiment has worsened towards Chinese companies after Beijing continues to flex its muscles. Hong Kong’s Hang Seng index fell 4.5% with some of the big tech stocks weighing on the index including delivery platform Meituan down 15% and internet giants Alibaba and Tencent both declining by approximately 8%. Those movements weighed on FTSE 100 investment trust Scottish Mortgage which has stakes in all three companies.

“It’s been a difficult year for investors in Chinese stocks due to regulatory interference. This has been an underappreciated risk for companies where most of the attention has been on the fast levels of revenue growth.

“Another bout of US companies will report earnings later today including Alphabet, Apple and Microsoft and a strong showing from them could encourage some investors to ditch Chinese tech names in favour of the more familiar US names. However, regulatory intervention also remains a big risk to this part of the market, as concerns grow over the largest players having too much power.”

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