China holds London back

Heading into the close the FTSE 100 is falling further into the red as the Chinese growth figures hit the commodity sector.

London city
Source: Bloomberg

The London market has been held back by natural resource stocks, and the move south by commodity-related firms has weighed on the FTSE 100 all day. As far as mining company sell-offs go, we have seen worse in recent history, but the decline was enough to keep the British equity benchmark under water.

China’s growth figures were proof that the second-largest economy in the world is slowing down, and for the time being it looks like the country is heading for a soft landing. The service sector picked up the slack in the Chinese GDP report, and this could be the start for the shift from manufacturing to a service-based economy which is bad news for mineral extractors.

The GDP figures from China were a bit of a non-event as they painted a picture of a gradual decline in growth, rather than the sharp fall in output some dealers were fearing. Some traders are yet to be convinced by the official figures from Beijing as contradictions between the independent surveys and government conducted in the past play on their minds.

Equity markets in continental Europe are more upbeat ahead of the ECB meeting this week, and since the region is suffering from negative CPI, speculation is growing that there could be additional easing in the pipeline. Mr Draghi has a history of dropping hints well before he acts on his promises, and investors are taking advantage of the cheap euro and picking up European shares in the hope of an extension of the stimulus scheme.

In the US, the Dow Jones is 40 points lower, at 17,170. Morgan Stanley issued very disappointing third-quarter results, and dealers had already lowered their expectations after its competitors posted poor numbers last week. Morgan Stanley’s trading revenue was even by current Wall Street standards. Trading departments in major banks all had a tough time as more regulation and less market volatility is leading to lower revenues. 

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