FTSE 100 lifted by financial stocks, Chinese property market slumps and WH Smith dragged into E.coli crisis

“After a difficult last week, the FTSE 100 started Monday on the front foot, with the index given a modest lift by financial stocks,” says Russ Mould, Investment Director at AJ Bell.

“Asian stocks were mixed after weak figures from the Chinese property market which showed an acceleration in what is already an alarming slump. This is likely to put pressure on the Chinese central bank to cut rates when it meets later this week.

“Last week saw French stocks plummet as President Emmanuel Macron’s snap election gamble looked like it could backfire given the far-right Rassemblement National party is riding high in the polls.

“This put pressure on the euro and created a concern that France could move away from planned budget cuts and thereby add to its budget deficit. This could have implications for France’s credit rating and borrowing costs. However, Monday morning saw French shares in bounce-back mode, although there is still some way to go to reclaim the title of Europe’s largest equity market by valuation which it surrendered to London last week.

“How long this new-found momentum lasts will depend on any further political developments across the Channel ahead of the election results in July.

“If the outcome of the French elections remains a toss-up, the UK is a different story and Rightmove’s latest missive on house prices suggested a limited impact from the snap poll.

“The latest Bank of England meeting and reading of inflation mid-week will have a greater influence. The focus will be on the commentary which accompanies another anticipated hold on rates and there will be hopes the rate of growth in prices might retreat to the magic 2% to warrant rate cuts soon.”

E.Coli Outbreak: WH Smith, Greencore

“WH Smith is the latest company on the stock market to be dragged into the E.coli outbreak in Britain. It joins the likes of Greencore, Amazon, Sainsbury’s and Walgreen Boots Alliance in being exposed to the health fear, with them either supplying or selling food products that have had to be recalled.

“Worst case scenario is that the health outbreak struggles to be contained and more people get ill, leading to growing fears about buying ready-made wraps and salads. However, precautionary measures to get potentially contaminated food items off the shelves could curb the problem and hopefully the root cause is quickly identified and the issue eradicated.

“From an investment perspective, a lot of bad news has already been priced into Greencore, more so than the retailers because it is a food supplier and has more to lose. They were down 6% last week, with most of the damage happening on Friday when the company was named as one of the suppliers of products being recalled from shops.

“Despite all the negative headlines over the weekend around the E.coli outbreak, both Greencore and WH Smith’s shares were firm in early morning trading on Monday. That implies the market is at ease with the issue and believes the risks to earnings can be contained.”

These articles are for information purposes only and are not a personal recommendation or advice.