March 23, 2023
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FTSE 100 Under Pressure From Homebuilders And Taiwan Tensions

On Tuesday, the blue-chip index in the UK ended the day slightly lower, after a rise in China-US tensions and a slide in homebuilder stocks offset strong results from oil giant BP.

Index declines

There was a 0.1% drop in the FTSE 100 index, which ended a choppy trading session that was dampened by concerns that Beijing-Washington tensions would worsen due to the Taiwanese visit of Nancy Pelosi.

China warned of repercussions if the US House of Representatives Speaker visited the self-ruled island, which is claimed as a province by Beijing. This pushed investors to seek safe-haven assets.

Market analysts said that this move from the Biden administration would make its economic relationship with China a tad more difficult.

Moreover, since US equities had been on a bullish run recently, it meant that the sell-off came from a high point.

Meanwhile, there was a 2.8% increase in BP, after it posted its second-quarter profit of $8.45 billion, making it a high of 14 years.

The oil major was able to give its share repurchases and dividend a boost, thanks to oil trading and strong refining margins. There was also a 1.4% gain in rival Shell.

UK markets

According to analysts, the big turnaround in profits for the energy sector had helped the UK does relatively well.

Two years ago, both Shell and BP had been struggling and now they are performing quite well, which has helped the UK market significantly.

When value outperforms growth, the UK market tends to do the same. Analysts also said that bond yields would start going up soon and this would provide support to economically sensitive sectors, such as financials and energy.

FTSE 250

The domestically focused FTSE 250 index also saw a fall of 1.0%, as there was a 7.9% decline in shares of Man Group.

This was after the fund manager talked about potential volatility in the short term. The biggest building materials seller in Britain, Travis Perkins declined by 9.3% because its first-half results were downbeat.

A 6.5% decline was also seen in Purplebricks after the online-only estate agency posted an annual loss and also warned that there would be challenges in the housing market.

The housing index in the UK overall saw a decline of about 5.1%. This was after Nationwide, the mortgage lender, disclosed data that British house prices had gone up in July at their slowest pace in a year.

Meanwhile, the Bank of England is scheduled to meet this week for its monetary policy meeting and markets are waiting to see what decision it takes.

While most participants have already priced in a hike of 50 basis points, some are skeptical, as such a move has not been seen since Britain’s independence.

So far, the Bank of England has already hiked interest rates by 25 basis points five times since December. However, with inflation close to double digits in the UK, it is possible that the central bank may decide to shift its stance and go for a bigger hike.

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