Global markets slump amid signs of slowdown in China

The FTSE 100 dropped by 1% after being dragged down by losses for insurance giant Prudential and online grocer Ocado Group.

Anna Wise
Wednesday 31 May 2023 12:21 EDT
(Ian West/PA)
(Ian West/PA) (PA Archive)

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A sea of red washed over global markets on Wednesday as the downbeat investor mood continued to pull on the world’s top stocks.

The FTSE 100 dropped by 1% after being dragged down by losses for insurance giant Prudential and online grocer Ocado Group.

It closed 75.93 points lower, or 1.01%, to 7,446.14, well below the 7,500 mark.

Signs of a slowdown in China added to the flailing global sentiment surrounding the US debt ceiling saga – the two biggest economies in the world.

Figures showed China’s manufacturing activity shrunk faster than expected in May, falling to a five-month low and prompting fears the economy is slowing despite hopes of a post-lockdown rebound.

The nation began significantly easing its strict zero-Covid policy at the end of last year, to the relief of investors and global businesses.

The boost from the reopening of China’s economy seems to have faded altogether, and this has meant that recession fears are front and centre once more

Chris Beauchamp, chief market analyst at IG

Chris Beauchamp, chief market analyst for online trading platform IG, said: “Markets have not been able to find their footing this afternoon, and as well as the US debt ceiling, are also grappling with renewed signs of a slowdown in China.

“The boost from the reopening of China’s economy seems to have faded altogether, and this has meant that recession fears are front and centre once more.

“The debt ceiling now seems to be mostly a procedural problem, but until it is resolved markets seem determined to remain on edge.”

Other European markets sustained bigger losses on Wednesday, with Germany’s Dax and France’s Cac both closing 1.54% lower.

US markets also started trading firmly on the back foot. The S&P 500 and Dow Jones were both 1.7% lower by the time European markets closed.

The pound was down about 0.1% against the US dollar to 1.2403, and up 0.7% to 1.1638 against the euro.

In company news, insurance giant Prudential saw its share price fall sharply after revealing its chief executive had resigned following an investigation into his conduct.

The firm said James Turner, who had been in the post for just over a year, “fell short” of standards in a matter relating to a recent recruitment, but Prudential stressed the matter had no implications for its financial performance.

Nevertheless, investors were unimpressed and its share price fell by 6.1%.

In the latest update for Purplebricks, shareholder Lecram withdrew its takeover approach, claiming the troubled estate agency’s financial condition is “significantly worse than expected”.

It leaves rival online agent Strike as the only remaining bidder in the running.

Purplebricks’ share price plummeted further on Wednesday afternoon after the announcement, and closed 27% lower.

In better news, budget retailer B&M soared to the top of the FTSE 100 after reporting rising sales anticipating earnings growth in the current financial year.

Despite posting a 17% drop in profits in the latest financial year, investors were buoyed by its promises for future success. Its share price climbed by 8%.

The biggest risers on the FTSE 100 were B&M European Value Retail, up 37.9p to 509.8p, Endeavor Mining, up 118p to 2,152p, Sage Group, up 14.2p to 871p, Astrazeneca, up 162p to 11,660p, and Auto Trader, up 8.6p to 630p.

The biggest fallers were Prudential, down 69p to 1,056p, Ocado Group, down 22.9p to 369p, Entain, down 55.5p to 1,319p, Abrdn, down 6.2p to 198.5p, and Barclays, down 4.46p to 151.34p.

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