FTSE 100 flat as traders digest strong China growth but worries over Covid spread

Jim Armitage
·3-min read
<p>Covid continues to worry investors</p> (PA)

Covid continues to worry investors

(PA)

The FTSE 100 was set for a flat start to the week today amid concerns about new Covid variants tempered the positivity over Joe Biden’s pledge for a near $2 billion economic stimulus plan.

Concerns that the Brazilian and South African strains of the virus may hit people who have already built up immunity to the main version dented some of the optimism that has driven stock markets higher in recent weeks, although most investors remain positive about 2021 being a turnaround year.

Early calls on the IG Index spread betting platform saw the FTSE 100 expected to open down 5.5 points at 6821.4 - an insignificant number that could easily be reversed by the time trading opens.

US markets are closed for Martin Luther King Day, probably adding to the lacklustre nature of the trading session.

Asian shares slipped back today, following falls on Wall Street late last week, as mining stocks lost ground, with the Nikkei in Japan losing nearly 1%.

Given the dominance of mining and commodities in the FTSE 100, that did not bode well for the UK index.

As Britain belatedly imposed new, restrictions on incoming travellers to UK airports the leisure sector could take further falls in share prices, although some business leaders have privately stated the measures have come too late.

Some investors are beginning to consider that firmer, faster action to get a grip on the virus would be better for the economy, and share prices, in the longer term than delayed reactions to events.

Ministers now appear to be considering making arrivals quarantine in hotels as they do in countries such as Australia which have successfully held off the virus.

Companies such as HSBC with exports to China could gain on news that the giant economy surged in the last four months of 2020 at a faster rate than before the Covid pandemic..

GDP growth for the fourth quarter today came out at 6.5% - ahead of expectations and creating growth for the year of 2.3%, the figures showed.

China’s industrial sector drove the gains, partly due to strong sales of PPE equipment to the rest of the world, and partly fuelled by heavy state support. However, retail sales are also in growth mode, with a 4.6% expansion in the quarter compared with industry’s 7.1%.

China had its highest monthly trade surplus in December in its history thanks to its 18% year-on-year growth in exports.

The news came as Boris Johnson faced a rebellion by his own MPs over plans for a trade deal with China.

The backbenchers are attempting to block the government setting up post-Brexit deals with countries with poor human rights records, and targets China due to its treatment of the Uighur people.

Hopes of closer relations with China have been one of the few causes for optimism about Brexit from the financial sector, which sees Asia as a major growth area away from the EU orbit.

Shares in LondonMetric, Segro, Tritax and other ecommerce warehouse property companies could rise after a Savills survey showed record amounts of institutional money pouring into the sector hlast year.

Blackstone, the private equity group, was one, putting £473 million into a warehouse platform acquisition.

Global M&A looked set to continue apace as the long-discussed takeover of Suez by Veolia edged closer. Last night, Suez two major Suez shareholders said they could accept a deal in what has been an ill-tempered takeover battle following Veolia buying a 29.9% stake in its rival three months ago.

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