Lacklustre FTSE as Eurozone Concerns Offset China Hopes

THURSDAY MARKET UPDATE: Signs that Chinese growth has landed softly rather than with the bump feared by many offered support to global markets on Thursday, but these were undermined by eurozone concerns

Holly Cook 18 October, 2012 | 5:23PM
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London-listed shares started the Thursday session in fine fettle on the back of positive data from China, but concern over the eurozone and the outcome of the latest EU Summit saw the FTSE slide back to close flat. 

The FTSE 100 index settled at 5,917, a rise of just 6 points or 0.1% on the day, while the FTSE 250 index added 25 points or 0.2% to 12,071.

In early deals, upbeat data from the US and China relieved concerns about the global slowdown. Data showed China's third quarter gross domestic product grew 7.4% from a year ago, its slowest pace since the second quarter of 2009 but in line with expectations. 

"Though this data confirms the Chinese slowdown, it is very much consistent with a soft-landing," commented James Bilson, economist at Schroders. "There are definite signs that Q3 marked the nadir of the Chinese growth cycle, and we see signs of strength towards year-end and going into 2013," he added. 

A batch of other data on fixed asset investment, retail sales and industrial output topped estimates, spurring hopes the Chinese economy was on track to stabilisation.

Data from the US on Wednesday further boosted confidence. Housing starts jumped 15% in September to the highest levels in four years. 

On the FTSE 100, natural resource stocks broadly extended the previous session's strong gains, but gold miners Fresnillo (FRES) and Randgold Resources (RRS) led the blue-chip casualties as investors shunned 'safe haven' assets. The two precious-metal miners shed 2.3% apiece.

Barclays (BARC) was also out of favour, down 1.5% after announcing it will report a headline loss for the third quarter on October 31, after taking another £700 million hit for PPI claims. Morningstar's Erin Davis said this came as little surprise as UK PPI claims continue to be significantly higher than banks' initial estimates. Her fair value remains unchanged.

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Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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