FTSE hampered by China economic jitters while UK data mixed

UK stocks continue to struggle to make headway on Tuesday as fresh worries over China’s economic recovery compounded downbeat data pointing to contraction in Britain’s own economy.

The export-heavy FTSE 100 index traded flat while the domestically-focused FTSE 250 slipped 0.1%, with China growth fears weighing on sentiment.

Data showed China’s vital services sector grew at the slowest pace in four months in August, with new orders shrinking. This exacerbated concerns about faltering momentum in the world’s number two economy.

“The poor PMI data from China highlights how fragile the region’s second-biggest economy remains, denting recovery hopes,” said ActivTrades analyst Pierre Veyret.

Adding to the gloom, UK composite PMI data indicated the economy contracted in August for the first time since early 2021. The services slowdown drove the decline as demand weakened and optimism faded.

S&P said reduced business activity was recorded in both manufacturing and services, though the production sector saw a sharper pullback. The figures highlight deteriorating conditions as headwinds bite.

More positively, the latest figures showed UK retail sales by value bounced back in August following a weak July. The 4.1% annual increase in the BRC-KPMG monitor was above the 3-month average.

But BRC chief Helen Dickinson cautioned growth may ease further in coming months even if volumes hold up, as the pace of price rises moderates amid cooling inflation.

In stock action, B&M European Retail dropped 3% even as the discount retailer acquired 51 stores from the failed Wilko chain for up to £13 million. The purchase expands its portfolio as competitors swoop on Wilko assets.

Insurer Lancashire climbed 3% as Morgan Stanley lifted its rating and price target on expectations of firmer premium pricing in a hardening market.

But North Sea oil producer EnQuest sank 17% after reporting a 38% first-half profit slump due to lower oil prices. It also plans to delist from Sweden’s Nasdaq exchange.

In the AIM-listed space, document management software firm GetBusy tumbled 13% despite reporting higher revenue and a narrowed loss for the first half of 2023.

GetBusy’s pre-tax loss narrowed to £603,000 from £724,000 a year earlier, while revenue increased 16% to £9.1 million. Recurring revenue also rose 18% to account for 96% of the total.

Overall, the trading backdrop remains uncertain with some firms thriving while others struggle. China and recession risks persist, capping market gains. The uneven recovery makes for continued volatility.