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Home Banking Market report: FTSE 100 clings onto gains

Market report: FTSE 100 clings onto gains

by admin
Susannah Streeter
  • FTSE 100 clings onto gains at the start of the week, staying close to record levels.
  • China’s latest economic snapshot disappoints, with lending contracting.
  • Brent Crude below $83 a barrel, as traders eye prospects for lower energy demand in the US.
  • Rumours increase about a listing of Shein and Raspberry Pi in the UK.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘’The FTSE 100 has taken a bit of a breather from its record rally, opening flat in early trade. London stocks may be largely in a holding pattern at the start of the week, but the pause follows a rocketing month, with the blue-chip index having roared ahead. Some caution is creeping back in, amid concerns that high interest rates may have to linger for longer in the United States, with the key CPI inflation reading expected this week. China’s economic recovery has hit another bump in the road, with the latest data showing scant progress.

A weaker-than-expected lending snapshot released in China over the weekend, indicated that the authorities still have an uphill battle in stimulating demand in the fragile economy. Although the inflation reading came in largely as forecast, with consumer prices rising 0.3% in April, the contraction in new bank lending was being read as an indication that interest rates offered were still too high for companies in struggling sectors to borrow to help expand activity. There will be hopes that the sales of long-term bonds announced today will help fund stimulus spending to mend leaky parts of China’s economic plumbing, but pressure is mounting for more stimulus. However, the People’s Bank of China isn’t expected to budge much on Wednesday, with the medium-term lending rate expected to be kept on hold.

Concerns that higher borrowing costs in the United States will be hanging around for longer are weighing on oil prices, as high interest rates are expected to sap demand for energy in the mighty US economy. Brent crude is hovering under $83 a barrel, as confusion also hangs around about future supplies from major oil producers. Comments from Iraq’s oil minister appeared to indicate that Baghdad was reluctant to cut production further. Speculation over production targets is set to continue ahead of the next OPEC+ meeting on June 1st. Although there continues to be distressing scenes of suffering in Gaza, risks of overspill from the Israel Hamas conflict are also considered to be easing, which is also helping bring down prices.

The government gears are cranking up this week to persuade more companies to list in the UK, just as rumours swirl about possible new IPOs popping up. Chancellor Jeremy Hunt was scheduled to host a charm offensive gathering midweek with entrepreneurs and tech company bosses at his Dorneywood residence in Buckinghamshire. It comes as the LSE hinted that the sticky IPO pipeline could be soon unblocked, with speculation mounting that fast fashion giant Shein and computer firm Raspberry Pi will list in the capital.

It’s been a challenging period on the IPO front and the City has been pedalling hard to attract new IPOs, with help from the government’s listing rules shake up, but it’s been an uphill struggle. However, London’s recent record run is likely to help instil more confidence that investors will greet new listings with enthusiasm. Clinching the Raspberry Pi floatation would be a coup, particularly given the reputation the UK is trying to foster as a breeding ground for tech startups.

While New York still holds immense draw, plans for a Shein listing there look set to be blocked by regulators over the fast fashion giant’s ties to China. London looks set to be the second-choice destination and while this would be boost for the City, is likely to present deep ethical issues for investors to navigate. Shein has come under significant criticism for the huge volumes of cheap clothes it produces, the lack of transparency in its supply chain and its appropriation of other designers’ work. Given these concerns there may well be wariness among investors who put ESG in their priority list, if the firm does list in London.”

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