FTSE underperforms against peers as inflation and rising COVID cases weigh

European stock markets mixed as inflation and rising COVID cases weigh
Sentiment across Europe as a whole has suffered due to the possibility of new lockdowns in the likes of France, Germany and Holland following a new surge in cases. Photo: by Thomas Krych/SOPA Images/LightRocket via Getty

European stock markets managed to eke out gains on Monday despite rising inflation and increased COVID cases weighed on sentiment.

In London, the FTSE 100 (^FTSE) ended flat after a lacklustre session, while the CAC (^FCHI) gained 0.4% in Paris and the German DAX (^GDAXI) was 0.2% higher.

It came as the UK housing market cooled in November, according to new data from property website Rightmove.

The firm said a typical home is being priced at about £342,400 ($459,181) this month, a fall of 0.6% or more than £2,000 compared to October. That was the biggest monthly drop since the January national lockdown.

It came as fears of rising COVID cases and lockdowns continued to send shockwaves into certain sectors ahead of Christmas.

Richard Hunter of Interactive Investor said: “Sentiment across Europe as a whole has suffered due to the possibility of new lockdowns in the likes of France, Germany and Holland following a new surge in cases.

"This in turn has hit the previously recovering travel sector, where restrictions on international travel could stop the return to normality in its tracks.”

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Elsewhere, Andrew Bailey, the governor of the Bank of England (BoE), has concerns about the UK’s rising inflation, admitting that he is “very uneasy about the situation”.

Appearing in front of the Treasury Committee on Monday, he said that growth in the British economy is starting to “flatten out”, meaning that Britain was facing more “two-sided risks” than before.

He pointed to weaker growth on one side, and rising inflation on the other, in the midst of an ongoing supply chain and energy crisis that is dampening recovery and pushing inflation even higher.

“I am very uneasy about the inflation situation… I want to be very clear on that.” Bailey said. “It is not, of course, where we want it to be, to have inflation above target.”

UK inflation stood at 3.1% in September, above the Bank’s 2% target, and is expected to keep climbing to as much as 5% by next April.

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Across the pond, the S&P 500 (^GSPC) dipped 0.1% at the time of the European close, and the tech-heavy Nasdaq (^IXIC) fell 0.4%. The Dow Jones (^DJI) was treading water.

Last week, US markets finished the week lower, albeit well off their lows, amid concern that rapidly rising inflation could crush the potential for further positive company earnings.

Despite still record numbers of vacancies in the US jobs market, the latest Michigan Consumer confidence numbers for November showed sentiment falling to its lowest levels in 10 years.

Shares were mixed in Asia on Monday, with rising inflation continuing to stoke fears.

In Japan, the Nikkei (^N225) climbed 0.6% despite news of the country’s economy contracting in the period from July to September amid tighter pandemic restrictions hitting consumer spending.

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In annual terms, the economy shrank at a rate of 0.3%. It contracted 0.8% from the previous quarter.

Takeshi Minami, chief economist at Norinchukin Research Institute, said: “The contraction was far bigger than expected due to supply-chain constraints, which hit car output and capital spending hard.”

The Hang Seng (^HSI) rose almost 0.3% in Hong Kong, while the Shanghai Composite (000001.SS) slipped 0.2%.

It came as China's latest data update was a mixed bag, with stronger retail sales and factory output but weaker housing prices and investments in fixed assets.

New-home prices in 70 of China’s biggest cities slid 0.25% during October, having already dropped in September for the first time in six years. Sales of new homes fell by over 22%, Reuters calculations showed, as demand weakened. That’s the fourth straight decline and the lowest this year.

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