A troubled backdrop has put markets in the red at the start of the new trading week. Renewed attacks on Kyiv following an explosion on the Crimea bridge at the weekend has proved a sad reminder that the war is far from over.
Also leaving investors on edge is the news that the Bank of England has doubled the amount of government bonds it is prepared to buy each day under a support initiative. While this programme is designed to provide calm to the markets following concerns about pension funds dumping gilts on the market, the fact it has doubled the previous limit of £5 billion also acts as a reminder that we’re living in unsettled times.
Russ Mould, investment director at AJ Bell, says: “Making matters worse were last Friday’s US jobs numbers where lower than expected unemployment will only serve to keep the Federal Reserve on its path of interest rate hikes, something the market did not like to hear judging by the sell-off on Wall Street which then extended to Asia on Monday.
“Also contributing to Asia market weakness are tighter export controls in the US, restricting the sale of semiconductors made with US technology unless the vendors have an export licence. There are also restrictions on US individuals or companies working with Chinese chipmakers and limits on exporting manufacturing tools that would help China develop its own equipment.
“Despite this market backdrop, it is interesting to note that quite a few UK-listed companies came out with better-than-expected news on Monday. Packaging group DS Smith, pawnbroker Ramsdens, fashion retailer Quiz and leisure group Hollywood Bowl all reported trading, sales or earnings ahead of forecasts.
“Alas, these pockets of good news weren’t enough to prop up the UK stock market. The FTSE 100 slipped 0.4% with utilities among the worst performing sectors. Reports suggest the UK Government is working on plans for a temporary revenue cap to help lower wholesale energy prices. There is a fear this would deter investment in new renewable energy projects, which in turn reduces the opportunities for energy companies to make additional profits in the future, something which does not go down well with investors.”