The London market has retreated as fears over China’s decision to raise interest rates continued to weigh on the minds of investors.
The implications of a rate hike in the world’s fastest growing economy were brought back into the spotlight as China’s markets – including the benchmark Shanghai Composite Index – opened lower after a holiday.
The concern spread west to London, where weak UK trade figures added to fears over the People’s Bank of China’s decision, and saw the FTSE 100 Index drop 17.6 points to 6073.7.
Shaken by the potential impact any tightening of monetary policy in China could have on demand for commodities, investors pulled out of heavily-weighted mining stocks. Copper company Kazakhmys dropped 29p to 1593p, Eurasian Natural Resources fell 15p to 1014p and Anglo-Chilean Antofagasta was down 21p at 1492p.
Sentiment was further weakened after the Office for National Statistics revealed the overall goods and services deficit in the UK hit a five-and-half year high of £4.8 million in December, casting doubt over the impact trade will have on supporting economic recovery. The pound fell against the dollar and the euro after the figures were published.
Household goods giant Reckitt Benckiser was not far behind after it disappointed investors with fourth quarter results showing a 3% drop in operating profits. The Slough-based group, which owns brands including Cillit Bang and Dettol, joined rivals in cautioning over input costs and competition within the industry. Shares in the blue-chip stock fell more than 6% or 216p to 3229p.
The biggest improvement in the top flight came from leisure group Whitbread, which climbed 44p to 1837p, while insurer Prudential added 17p to 732.5p.
Outside the top flight, shares in the London Stock Exchange raced ahead after it unveiled a deal to join forces with the owner of the Toronto Stock Exchange. The proposed combination, which will create a leading trading platform with more than 6,700 listings, helped LSE’s shares lift nearly 9% or 75p to 967p in the FTSE 250 Index.
In corporate news, Superdry fashion firm SuperGroup posted another stellar performance as it revealed its sales continued to soar in January. The update failed to encourage investors as shares edged ahead by 4p to 1749p.
There was further woe in the newspaper industry after Daily Mail & General Trust (DMGT) reported 332 consumer media job losses for the three months to January 2 as revenues and circulation continued to fall. Shares dropped more than 1% or 6.5p to 588p.