FTSE 100 drops as markets follow China lower

Chinese shares started on a cautious tone before aggressive sellers appeared in the afternoon.

The Shanghai Composite plunged over 6% by the end of the session.

London’s main market slid today despite stronger than expected inflation data as concerns about China’s economy weighed on the index.

Chinese shares started on a cautious tone before aggressive sellers appeared in the afternoon. The Shanghai Composite plunged over 6% by the end of the session.

“The speculation that China will loosen its lending policies to try and spur business activity is causing more harm than good as it sends out the message that its economy is in dire need of stimulus, and that is driving dealers towards the door” David Madden at IG said.

“All the news out of China recently has done nothing to restore confidence in its financial markets, and the ripple effect can be felt in Europe.”

Across Europe, markets struggled, with the French Cac40 and the Frankfurt-based Dax easing 14 points to 4,970 and 10,925 respectively.

In the UK better than expected inflation figures provided a bit of excitement for the markets.

“Even though inflation only saw a mild increase, from the expected zero to 0.1%, coupled with a core CPI improvement from 0.8% to 1.2% if was more than enough to boost the pound, which jumped against the euro and the dollar following the release of the figures” Connor Campbell at spread-betting firm Spreadex said.

The FTSE 100 failed to rise on the news, losing 30 points to 6,520.

Samuel Tombs at Capital Economics said the figures have little bearing on the timing of the first Bank of England interest rate hike.

The BoE has a target of 2% for inflation before it says it will consider raising interest rates.

Brent Crude below US$48.50 per barrel and copper hitting fresh 6 year lows meant the FTSE’s oil and mining stocks returned to the red.

Weighing heavily on the index were BP (LON:BP) down 1.2% to 374p, Shell (LON:RDSB) which was 31p lower to 1,780p and Rio Tinto (LON:RIO), which lost 51p to 2,394p. 

Away from the index, Cairn Energy (LON:CNE) was the biggest faller on the FTSE 350 as it reported unveiled widening losses for the first half. Shares dropped 8.5% to 141p.

Elsewhere, Daniel Stewart (LON:DAN) was a big riser as shares surged amid hopes that the former Quindell boss Rob Terry could look to up his stake in the broker. Shares were 20% higher at lunch to 1.74p.

Mariana Resources (LON:MARL) jumped as the maiden resource estimate at the Hot Maden gold-copper project reckons it contains 4.7mln tonnes at 5.5g gold and 1.8% copper.

That takes the grand total up to 3mln ounces at a gold equivalent grade of 11.2 grams per tonne. Shares were 16.85% to the good at 2.6p.

Conversely, APC Tech (LON:APC) was the biggest faller of the day after a trading update, but broker Cantor still sees upside in the company.

“APC’s trading statement is disappointing but still shows revenue on track in 2015”the broker said.

While the nature of the business environment has delayed it becoming profitable, “it does not preclude it and we remain positive on APC” it added. Shares were 25% lower at 12.1p.

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