Chinese property woes weigh on markets, Fed minutes raise prospect of further rate hikes and BAE buys Ball’s aerospace business for $5.6 billion

“In driving Asian indices to nine-month lows the current Chinese property woes may prompt an uneasy feeling of déjà vu for investors who remember previous episodes of turbulence in the country’s real estate sector and the knock-on effect they had on wider markets,” says AJ Bell Investment Director Russ Mould.

“Officials in Beijing are doing their best to allay fears but their efforts at reassurance may fall on deaf ears for now as the crisis plays out.

“The gloom has spread to the FTSE 100 which sank 0.4% in early trading, although interestingly the mining stocks which you might have expected to be negatively impacted by any bad news from China are trading slightly higher.

“The other major cause for disquiet for the market is interest rates, and the minutes from the latest Fed meeting have thrown a cat among the pigeons by pointing to upside risks on inflation which might necessitate more rate hikes. It feels like we’re in a constant back and forth between central banks and the markets, with the former having to constantly disabuse the latter of the notion the rate hiking cycle is at an end.”

BAE Systems

“BAE Systems’ deal for US industrials firm Ball’s aerospace arm is a reminder there is more to the business than just being a maker of armaments.

“BAE is looking to expand in nascent sectors like space as well as build on its capabilities in electronics and this deal looks a decent fit in both areas.

“The only downside is the $5.6 billion price tag which looks a touch on the expensive side and potentially explains the initial lukewarm reaction from shareholders to the deal. The cost will raise the pressure on the company to execute smartly on the integration process. Assuming it hits the targets it has outlined then it should be earnings accretive in the short term.

“The fact BAE has been able to carry out a transaction like this with a minimum of fuss is in itself testament to its improved fortunes.”

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