Written by: Susannah Streeter | Hargreaves Lansdown
- The Hang Seng in Hong Kong fell by 1.6%, and the FTSE 100 has opened lower following China protests.
- Brent Crude falls back to $81 a barrel, piling pressure on energy stocks.
- Black Friday sales volumes hold up, but retail shares fall back in early trade.
Unprecedented waves of protest in China have caused ripples of unease across financial markets, as worries mount about repercussions for the world’s second-largest economy. As demonstrations spread across the country from Beijing to Xinjiang and Shanghai, reflecting rising anger about the zero-Covid policy, a sustained recovery in demand across the vast country appears even further away.
This has piled fresh downwards pressure on the oil price, with Brent Crude dropping to $81 a barrel, the lowest level since early January. Already pockets of violence have erupted as police forces push back at protestors, but there are expectations that a much more stringent security clampdown will be ordered. This is all dashing hopes of an easing of restrictions, given that Xi JinPing will not want to look like he’s backing down in the face of protests. The lower oil prices has pushed energy stocks down in early trade on the FTSE 100, with BP and Shell sharply lower. Mining stocks are also under pressure, with Anglo American falling 1.7%. Luxury goods maker Burberry, which is highly reliant on the Chinese consumer to even out its own recovery from the pandemic, has also been hit by some volatility. Its shares dipped by around 1% in early trade before recovering.
As the Black Friday mega promotion continues into Cyber Monday, there will be some relief among retailers that consumer sentiment hasn’t been knocked as badly as expected by the cost-of-living crisis. However, there now seem now to be some expectations that shoppers may be snapping their purses shut again, after the Black Friday blowout. Shares in high street stalwarts Next and Marks and Spencer fell back in early trade, while grocers Sainsbury’s and Tesco are also slightly weaker. Concerns about mounting household bills showed up in the product mix of the rise in volumes, compared to last year, with air fryers and other energy efficient devices helping drive sales. Data from Barclaycard indicates consumer appetite for spending was stronger in the week running up to the weekend, with volumes up by more than 3% compared to last year, helped by a World Cup boost to spending. This may continue to provide some support, particularly with England and Wales going head-to-head tomorrow, but it’s set to be short term fizz before cost-of-living pressures return to weigh on the minds of consumers.