By Patrick Munnelly, Market Strategist, Tickmill
On Tuesday, the UK’s FTSE 100 index remained relatively unchanged, down 0.09%.
Global economic concerns
The index, which is heavily influenced by commodity stocks, has seen limited gains so far this year due to concerns about a global economic slowdown and high inflation, leading to expectations of further tightening of monetary policies.
In today’s session, losses in mining stocks were observed as a result of a downbeat outlook on Chinese demand. However, healthcare stocks rebounded following a previous day’s slump, helping to offset the losses, with AstraZeneca LON:AZN recovering 2% of yesterday’s slide. Industrial metal miners slipped by 0.6%, tracking the early decline in most base metal prices due to weak economic data from China, which raised concerns about demand.
FTSE 100 biggest movers
On the earnings front Sainsbury’s LON:SBRY, the second-largest supermarket group in Britain, saw a decline of 1.82% after reporting quarterly results. Although the company maintained its financial guidance for the year and reported a 9.8% rise in underlying sales for the first quarter driven by inflation, competition concerns weighed on the shares as online grocer Ocado LON:OCDO continued to shine up 2.2% on the session.
UK homebuilders experienced a decline in their stock prices early in the session as JP Morgan raised concerns about a potential slowdown in sales. The UK housebuilders’ index fell by 1.5% as analysts from JP Morgan noted that uncertainty in interest rates could lead to a softening in sales rates, jeopardising volume estimates for all UK homebuilders in 2024. JP Morgan also highlighted the possibility of affordability-driven average selling price declines.
As a result, the brokerage downgraded its rating on Persimmon LON:PSN to “neutral” from “overweight” and reduced the target price from 1,600p to 1,090p. They expressed scepticism about the company’s potential for a recovery in the near term. Additionally, JP Morgan lowered its target price on all eight constituents in the sector index. Among the homebuilders, blue-chip companies such as Berkeley LON:BKG, Barratt LON:BDEV, Taylor Wimpey LON:TW., and Persimmon were hit, but recovered as the session progressed.
Overall, the housebuilders’ index has declined by approximately 2% year-to-date.
Recently promoted to the blue chip 100 index, engineering firm IMI LON:IMI sits at the bottom of the table shedding 2.21%.
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