China tensions permeate markets

The FTSE broke below the key 6000 level at the start of Friday’s trading as the worsening of US-China relations

Downtrend 5

The FTSE broke below the key 6000 level at the start of Friday’s trading as the worsening of US-China relations, China’s plans for a national security law in Hong Kong and the staggering UK public debt figures sapped optimism out of the market.

Running out of money

The UK public finances are now beginning to look scary with public sector net debt rising to close to £1.9tn, not far off the size of the UK’s whole economy. In April alone the amount the government was in debt rose to £63.5bn,  a long way from the surplus of £9.8bn in the same month last year. The scale of the financial strain is beginning to dawn on currency investors, the pound lost nearly 0.4% against the dollar.  

Asia exposure

China’s manhandling of Hong Kong’s legal system is hitting financial institutions with heavy Asia exposure. Insurer Prudential which sold off its UK business last year to focus on Asia and the US has already been struggling even before the latest tensions. Its sales in Asia dropped by nearly a quarter during the first three months of the year and then declined a further 8.3% as of this morning. Standard Chartered and HSBC, both with significant businesses in Asia, are also trading lower.

Utilities hit

Closing of speculative positions ahead of the UK’s three day weekend are hitting utilities like Centrica, typically a defensive stock. Centrica’s value has increased by over 17% in the last month but for the moment the rally seems to have run out of steam, potentially before another leg up. The stock has a long way to go before regaining the 60% lost since February.

More from Indices

Related Articles

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.