16th May 2022 06:57
(Alliance News) - The FTSE 100 looks set to start the new trading week on the back foot, following less than stellar data in China on Monday that showed the fallout from the country's zero-Covid policy.
IG futures indicate the FTSE 100 index will open down 70.65 points, or 0.4%, at 7,388.50 in London on Monday. The blue-chip index closed up 184.81 points, or 2.6%, at 7,418.15.
"The big test for markets in Europe this week will be whether we can hold onto the gains we saw on Thursday and Friday, given that central banks are in tightening mode, and this week's economic data is unlikely to show much in the way of improvement in the short to medium term," CMC Markets analyst Michael Hewson said.
"This morning’s April retail sales and industrial production data from China are a case in point. Last week the April trade numbers showed a sharp fall in both imports and exports as transportation difficulties and port stoppages impacted the flow of goods and services, pointing to the significant disruption caused by China's current Covid policies."
Industrial production fell by 2.9% year-on-year in April, reflecting damage from shuttered factories and transportation woes as officials ramped up Covid restrictions last month. This figure is the weakest since early 2020, and represents a swing from 5.0% growth in March.
The dismal showing came as China battles its worst Covid outbreak since the early days of the pandemic.
The National Bureau of Statistics also announced data showing that retail sales shrank 11% on-year in April.
It is the biggest slump since March 2020 as Chinese consumers remained cooped up at home or jittery over lingering restrictions.
CMC's Hewson added: "The poor nature of these numbers, along with the probability of how much improvement can be expected given China's zero-Covid policy Asia markets have seen a mixed start to the week, which looks set to translate into a lower open for markets here in Europe. "
In Asia on Monday, the Japanese Nikkei 225 index was up 0.5%. In China, the Shanghai Composite was 0.3% lower, while the Hang Seng index in Hong Kong was up marginally. The S&P/ASX 200 in Sydney was up 0.4%.
Brent oil was quoted at USD109.47 a barrel Monday morning, lower from USD111.00 late Friday. Gold stood at USD1,808.20 an ounce, down against USD1,940.80.
AvaTrade analyst Naeem Aslam said: "Oil prices are moving lower to begin the week as the general sentiment in the market isn't supporting oil demand. Investors are more worried about the strong possibility of a recession taking place in the biggest economy in the world, the US. Even if we hit a technical recession where the GDP growth shows contraction for a very brief period, it would only adversely influence oil demand."
In the US on Friday, equities ended sharply higher on reduced fear about aggressive interest rate rises in the US following well-received comments from Federal Reserve Chair Jerome Powell.
The Dow Jones Industrial Average closed up 1.5%, the S&P 500 up 2.4%, and the Nasdaq Composite up 3.8%.
The pound was quoted at USD1.2250 early Monday, higher from USD1.2230 at the London equities close on Friday.
The euro was priced at USD1.0407, down slightly against USD1.0410. On Friday, the common currency for the euro area sank to an intraday low of USD1.0350 against the greenback, its lowest level since January 2017.
Against the yen, the dollar was trading at JPY128.96 early Monday in London, firm from JPY129.28 late Friday.
A quiet economic events calendar on Monday has eurozone foreign trade at 1000 BST.
The UK corporate calendar on Monday has interim results from Diploma and a trading statement from Greggs. Already out, Ryanair reported a narrowed annual net loss of EUR355 million, cut from EUR1.02 billion, as revenue multiplied to EUR4.80 billion from EUR1.64 billion.
By Paul McGowan; [email protected]
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