Chinese crackdown and falling metal prices make markets see red

The price of iron ore has fallen to its lowest point this year

Pa City Staff
Thursday 19 August 2021 17:07
China’s Xi Jinping (left) has signalled a crackdown on wealth inequality in the country (Matt Cardy/PA)
China’s Xi Jinping (left) has signalled a crackdown on wealth inequality in the country (Matt Cardy/PA)

London-listed companies that are reliant on trade with China and commodity prices continued to put downward pressure on the city’s top index on Thursday.

For the second day running, Burberry was one of the hardest-hit companies on the FTSE 100, on a tough day overall for the index.

The FTSE fell 1.5%, or 110.46 points to 7,058.86.

China has signalled a move towards cracking down on the money that its business elite – many of whom patronise Burberry – make in the country.

“Burberry is … lower following on from yesterday’s declines over concerns about Chinese wealth redistribution, which is also hammering the likes of Kering and LVMH on the Cac 40 in Paris,” said CMC Markets analyst Michael Hewson.

Burberry’s woes helped lead the FTSE 100 lower, but the biggest headache of the day was reserved for Anglo American, whose shares plummeted by a 10th.

It was hit by wider concerns in the natural resources sector that the US Federal Reserve might start cutting back support for the economy.

Iron ore prices have also hit their lowest levels this year on news out of China.

“Mining stocks have fallen into a hole, along with iron ore and copper prices, as Anglo American, Antofagasta, BHP and Rio Tinto all fall back sharply, as Chinese cuts to steel production announced earlier this month hit demand, as well as consumption for iron ore,” Mr Hewson said.

In Paris, the Cac 40 fell 2.4% while its German cousin the Dax dropped 1.4%.

In New York, the S&P 500 was flat and the Dow Jones traded down around 0.4% a little before European markets had closed.

At the same time, sterling was trading flat, buying 1.3656 dollars or 1.1691 euros.

On Thursday, the Competition and Markets Authority confirmed it would open an investigation into the acquisition of Ultra Electronics, a defence company, by Cobham which is owned in the US.

The CMA will consider if the deal would hit competition and also any potential impact on national security.

Shares in Ultra Electronics closed down 1.3%.

The UK’s largest mortgage lender is hatching plans to become one of the country’s biggest landlords, accordion to new reports.

Shares in London-listed Lloyds Banking Group closed the day down by 1.9% after the news was revealed.

It will reportedly buy 50,000 homes over the next decade.

The biggest risers on the FTSE 100 were Just Eat Takeaway.com, up 157p to 6,797p, Polymetal, up 24.5p to 1,515.5p, Bunzl, up 27p to 2,686p, Smith & Nephew, up 14p to 1,409.5p, and National Grid, up 9.5p to 978.3p.

The biggest fallers on the FTSE 100 were Anglo American, down 323.5p to 2,912p, United Utilities, down 128.5p to 1,812.5p, M&G, down 11.7p to 209.9p, Phoenix Group, down 35p to 632.6p, and BP, down 14.9p to 287.75p.