Our head of investment rounds up the morning's big news.
The FTSE 100 is lagging broader gains across Europe to start the week, trading just shy of the flatline. Miners such as Anglo American (LSE:AAL), Antofagasta (LSE:ANTO) and Rio Tinto (LSE:RIO) are languishing towards the bottom of the UK index after China issued a modest growth target of 5% for its economy this year. The DAX surpassed the 15,600 resistance level for the first time since February 2022 after European stocks logged their best week since the start of the year.
US futures are pointing higher ahead of this week’s testimony from Fed chair Jay Powell as well as the latest US jobs report. The major US averages closed last week higher with the tech-heavy Nasdaq Composite leading the gains for the second straight month, while the Dow snapped its losing streak.
CHINA GDP TARGET
China set a growth target for this year of 5% at the start of its National People’s Congress, at the lower end of expectations. It comes after the world’s second largest economy grew by a lacklustre 3% last year, sharply below 2022’s abandoned official target.
China’s economy suffered sharply last year on the back of Beijing’s strict zero-tolerance to Covid approach which hampered business activity and consumer spending in pursuit of its public health goals. China has finally started to reopen its economy to the world, long after most countries have emerged from lockdowns and government restrictions. Similar to the tailwind already enjoyed by the UK, US and elsewhere, there appears to be a wave of pent-up demand for goods and services being unleashed to the Chinese and global economy.
This has been reflected by the recent rally for Chinese stocks with the Shanghai Composite for example staging impressive gains since the trough at the beginning of November. China-sensitive stocks globally have also enjoyed a strong uptick such as Burberry which is up around 46% over the past six months.
However the path to economic reopening could be bumpy with the potential for further spikes in Covid infections on the mainland and issues surrounding its embattled property sector, prompting some investors to remain cautious towards China. Today’s full-year GDP forecast from the Chinese government suggests that the authorities in Beijing are also taking a vigilant approach to the growth outlook for this year.
The modest GDP target weighed on Chinese stocks overnight with the CSI 300 and the Shanghai Composite closing lower.
- Insider: bosses spend over £1m on FTSE 100, AIM and Aston Martin
- Shares for the future: why I think these 24 shares are good value
UK CAR SALES
According to preliminary data from the Society of Motor Manufacturers and Traders (SMMT), British new car registrations grew by 25% in February. Electric cars accounted for around a quarter of this figure with growth of almost 500,000 new cars anticipated for the full-year. It comes after new car sales rose by 14.7% in January, the sixth consecutive month of growth and the best start to the year since the start of 2020 before the onset of the pandemic.
Last year’s supply and chip shortage pressures appear to be easing at the start of 2023 while increased demand for electric vehicles is also providing a tailwind to sales. However there is still caution around the economic backdrop with lacklustre growth and rampant inflation which could weigh on consumer and business appetite for new vehicles. As a result, demand is still below its pre-Covid levels with 2023 new car registrations expected to fall short of the figure from 2019.
The official figure will be announced at 9am.
London-listed big data firm Wandisco (LSE:WAND) has responded to press speculation by confirming that it is proactively exploring the US to create a dual listing. WANdisco’s chairman and CEO David Richards first discussed the possibility of a US listing in 2017. The news comes after Arm Holdings abandoned London as a potential location for its IPO, FTSE 100 building business CRH (LSE:CRH) also said it was planning to list in the US and Flutter Entertainment (LSE:FLTR) has been considering a secondary listing in New York. This has raised concerns about a potential flight of listed businesses away from the London Stock Exchange post-Brexit to the US. However, we are far from seeing a mass exodus from the London market as of yet. Despite the challenges, the City appears to be preserving its position as Europe’s leading global financial hub.
One of the biggest hurdles for the UK market has been its struggle to attract tech giants. New York continues to be the go-to destination for tech behemoths with the Nasdaq boasting giants such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN). While the FTSE 100 enjoyed relative resilience last year in part thanks to its shortage of tech stocks, this has long been a criticism and meant that the UK large-cap index missed out on the gains enjoyed stateside from the tech boom prior to 2022. There have been some high-profile tech disasters in London including Deliveroo (LSE:ROO)’s calamitous IPO and THG (LSE:THG)’s share price slide, adding to the sense of caution towards the UK among tech businesses deciding where to list.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.