The FTSE 100 has slipped lower at the open this morning as investors fret over the impact of inflation and a slowing global economy.
London’s flagship index fell 0.4 per cent in early trading, dragged lower by a sharp four per cent fall for Abrdn after a troubling few days in which it has shed more than 10 per cent of its value.
BAE Systems also fell 3.28 per cent as investors react to its £5.6bn (£4.2bn) deal to snap up US aerospace firm Ball. The share slide is likely to be a reaction to the cash funding for the deal which will eat into any potential dividend payout for shareholders.
AJ Bell investment director Russ Mould said the “only downside is the $5.6 billion price tag which looks a touch on the expensive side and potentially explains the initial lukewarm reaction from shareholders to the deal. The cost will raise the pressure on the company to execute smartly on the integration process. Assuming it hits the targets it has outlined then it should be earnings accretive in the short term.
Investors have been skittish globally as fears spread of a slowdown in the Chinese economy. Analysts said the fears had put a damp mood on markets in London this morning.
‘’A more downbeat mood is settling in about what lies ahead for the global economy, as China’s problems spread into the financial sector, while high inflation still lingers elsewhere,” said Susannah Streeter, analyst at Hargreaves Lansdown.
“The FTSE 100 has opened on the back foot, with the Lionesses’ winning spirit proving highly elusive to capture, given the concerns unsettling investors right now.”
The City is also digesting the economic figures of the past two days, with traders now betting the Bank of England will lift rates to six per cent to tame inflation. Further rate move is likely to have been fuelled by stronger than expected wage data this week.
Meanwhile, Mould commented that “in driving Asian indices to nine-month lows the current Chinese property woes may prompt an uneasy feeling of déjà vu for investors who remember previous episodes of turbulence in the country’s real estate sector and the knock-on effect they had on wider markets.”
“Officials in Beijing are doing their best to allay fears but their efforts at reassurance may fall on deaf ears for now as the crisis plays out.
“The gloom has spread to the FTSE 100 which sank 0.4% in early trading, although interestingly the mining stocks which you might have expected to be negatively impacted by any bad news from China are trading slightly higher.”