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FTSE steadies on relief over Chinese recovery

Injection of liquidity by China's central bank halts heavy falls in country's shares and helps to steady global stock markets.

FTSE steadies on relief over Chinese recovery

The FTSE 100 has steadied after yesterday's heavy falls, as an injection of liquidity by China's central bank helped to arrest a rout of the country's stock market.

The UK blue-chip index rose 11 points, or 0.2%, to 6,105 in relatively calm trading following yesterday's slump.

Global markets endured a torrid start to the year yesterday, sparked by a near 7% fall in China's Shanghai Composite index. A slump in Chinese factory activity and the imminent expiry of a ban on share sales by large investors prompted heavy selling, sparking stock market slumps around the world.

But the Shanghai Composite today was broadly flat, despite fears the suspension of trading yesterday would lead to pent-up bearishness driving another rout.

Sentiment was helped by the People's Bank of China's (PBOC) offer of 130 billion yuan (£13.6 billion) in 'reverse repurchases' or deals to sell government debt to counterparties with an agreement to repurchase them in the future.

Ten major Chinese companies meanwhile said their controlling shareholders and bosses would not sell shares within the next six to 12 months, helping to calm investor fears of an imminent sell-off.

'The PBOC's offer of 130 billion yuan in reverse repurchase agreements appears to have eased liquidity concerns in Chinese money markets and offered some level of comfort for equity investors,' said Jasper Lawler, market analyst at CMC Markets UK.

'With rising capital outflows thanks to the weakening currency, tight liquidity has forced the PBOC to offer alternative funding.'

Eurozone markets were in the red, but also avoided the heavy falls of yesterday. The French CAC 40 fell 0.2%, the German DAX 30 was down 0.6%, Spain's Ibex dropped 0.3% while Italy's FTSE MIB added 0.2%.

On the FTSE 100, Royal Mail (RMG) was the top riser, up 2.4% at 447.6p after an upgrade to 'buy' from 'hold' by analysts at Cantor Fitzgerald.

Next (NXT) was among the biggest fallers, down 5.2% at £68.14 after the retailer reported disappointing sales in the run-up to Christmas, blaming unusually warm weather.

'Holders will be happy to receive another 60p special dividend, planned for February thanks to good cashflow, but sceptics might not like a worse net debt position and what amounts to a challenging environment in which to be a retailer,' said Mike van Dulken, head of research at Accendo Markets.

Emerging market-focused stocks meanwhile continued to suffer. Aberdeen Asset Management (ADN) fell 6% to 265.1p, Standard Chartered (STAN) was down 2.7% to 527.3p while Burberry (BRBY), which depends on China for a substantial chunk of its business, dropped 1.9% to £11.18.

1 comment so far. Why not have your say?

Villan of the North

Jan 05, 2016 at 12:50

Usual rules don't seem to apply to the Chinese >

Communist govt running a capitalist economy?

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Daniel Godfrey: help me launch The People’s Trust!

by Gavin Lumsden on Oct 23, 2016 at 00:01

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