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CITY DASHBOARD Miners receive China boost but house price slide drags on builders
by cityam
LONDON’s FTSE 100 sprung higher yesterday, propelled by investors piling into commodity giants after a batch of better-than-expected data indicated the Chinese economy is on the mend.
The capital’s premier index flung 0.49 per cent higher to back above the 7,900 point mark, while the domestically-focused midcap FTSE 250 index, which is more aligned with the health of the UK economy, fell 0.16 per cent to nearly to 19,870.60 points.
Fresh numbers released overnight revealed China’s manufacturing sector has returned to growth and is recovering much faster than analysts had expected, fuelling hopes that the globe’s second largest economy’s resurgence will lift the rest of the world.
The Caixin manufacturing purchasing managers’ index climbed to 51.6, smashing the consensus forecast of 50.2 and putting China’s factory output firmly above the 50 point threshold that separates growth and contraction.
FTSE 100 miners soared on the news, with Anglo American and Antofagasta trading at the top of the index, each adding more than three per cent.
Housebuilders tempered gains on the premier index after building society Nationwide said house prices dropped at their quickest pace in a decade over the last year, down 1.1 per cent.
Barratt Developments anchored the FTSE 100, shedding more than four per cent, while Berkeley Group lost nearly two per cent.
The pound was broadly flat against the US dollar.
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A Big Concern
Investors will likely find “better value” in companies other than Persimmon, Peel Hunt’s analysts said, after the housebuilder warned its sales could drop by 40 per cent in 2023. The analysts said that while 2023 should be the “trough” of Persimmon’s troubles, higher construction costs will hit its profit margins. They gave Persimmon a ‘hold’ rating with a price target of 1,190p.
“These sharp falls aren’t being reflected in core prices, and wages are still rising. When the January CPI data was released, core CPI was at a record high of 5.2 per cent. It has since been revised up to 5.3 per cent. This is likely to be a big concern for the European Central Bank.”
Shares in engineering company Weir offer strong prospects for growth, according to analysts at Peel Hunt, who said the mining technology company is in a good position to capitalise on soaring demand for minerals due to the global energy transition. The analysts said they see “plenty more to come” after Weir’s “impressive” results as they gave the firm a ‘buy’ rating with a price target of 1,950p.
