Commodity stocks, Natwest drag FTSE 100 lower

  • FTSE 100 down 0.7%, FTSE 250 off 1.2%
  • Natwest falls to bottom of FTSE 100
  • Glencore cuts core earnings guidance

Oct 28 (Reuters) – UK’s FTSE 100 fell on Friday, as commodity-linked stocks dropped on worries about widening COVID-19 curbs in China, while Natwest slumped after reporting a flat third-quarter profit.

The exporter-heavy FTSE 100 (.FTSE) fell 0.7%, with mining (.FTNMX551020) and energy (.FTNMX601010) stocks shedding 2.8% and 0.7%, respectively, as oil and metal prices slid after top consumer China expanded COVID-19 restrictions.

Also weighing on sentiment was a Financial Times report that Prime Minister Rishi Sunak and Chancellor Jeremy Hunt were exploring additional tax hikes and public spending cuts, including an increase in windfall taxes on oil and gas producers, to fill a hole in public finances.

“I’m not surprised because the government here is desperate to find sources of revenue,” said Stuart Cole, head macro economist at Equiti Capital.

“Investors are now concerned about the government taxing the significant sources of revenue that banks and energy companies have been earning.”

Shares of NatWest (NWG.L) dropped 7.8% to the bottom of FTSE 100 after the company reported a flat quarterly profit, blaming bad loan charges from a worsening economic outlook and the cost of exiting its Irish business.

Glencore (GLEN.L) fell 2.4% after the Swiss-based miner said it expected a drop in second-half adjusted core earnings for its trading unit, as operations were hit by extreme weather conditions in Australia and supply-chain snags in Kazakhstan.

British Airways owner IAG (ICAG.L) slipped 1.1% after it said demand for its flights had not wavered after a strong summer that saw revenue exceed pre-pandemic levels.

Investors are looking ahead to the Bank of England’s policy meeting next week, where the central bank is expected to raise interest rates by 75 basis points.

“If we do see a 50 basis-point hike, it would be based on the signal that the fiscal package is going to be tighter than what markets may have been anticipated,” Cole said.

The domestically oriented FTSE 250 (.FTMC) declined 1.2%, but was set to post a weekly gain amid hopes for fiscal stability under the new government.

Reporting by Johann M Cherian in Bengaluru; Editing by Neha Arora and Subhranshu Sahu

Our Standards: The Thomson Reuters Trust Principles.

source: reuters.com