UK Markets closed

FTSE 100 down and oil price hits 11-month low as China protests hit markets

FTSE 100 People hold white sheets of paper in protest over coronavirus disease (COVID-19) restrictions after a vigil for the victims of a fire in Urumqi, as outbreaks of COVID-19 continue, in Beijing, China, November 28, 2022. REUTERS/Thomas Peter
The FTSE 100 has been affected by the unrest in China, which has sparked fears over falling demand. Photo: Thomas Peter/Reuters

The FTSE 100 and European stocks were in the red on Monday, as protests intensify in major Chinese cities against the country’s stringent zero-COVID rules.

The FTSE 100 (^FTSE) lost 0.35% to 7,461 during midday trading, while the CAC (^FCHI) in Paris fell 0.99% to 6,646 points. In Germany, the DAX (^GDAXI) slipped 0.96% to 14,401.

Protests over strict anti-virus curbs erupted across the world's largest crude importer over the weekend, including demonstrations in Beijing and Shanghai, sparking a broad selloff in commodities as the week opened.

Brent crude (BZ=F) plunged to $81 per barrel, while US crude (CL=F) was below $75 per barrel for the first time in around 11 months.

Naeem Alsam, chief market analyst at Avatrade, said: “Basically, it is demand that is creating the main issue for the price, and the fact that we have a potential recession threat and now the COVID issues in China, things are becoming difficult for oil traders

"The reality is that no one wants to see more lockdowns in China, as a situation like this creates nothing but more headwinds for oil prices."

In London, the fall in the oil price hit BP (BP.L) and Shell (SHEL.L), down 1.65% and 1.04% respectively.

The ongoing protests in China over quarantine restrictions were also affecting expectations for demand for metal. Falling metal prices hit miners Anglo American (AAL.L) and Rio Tinto (RIO.L), down 0.73% and 0.51% respectively.

Raffi Boyadjian, lead investment analyst at XM, said: "Risk assets took a knock at the start of the week as worries about instability in China and how the country’s unyielding zero-COVID policy might further blight the outlook led investors to search for safety.

"Anti-lockdown protests started spreading after a deadly fire in Xinjiang last Thursday where residents were reportedly unable to escape the residential complex due to the harsh COVID restrictions.

"But the protests erupted further over the weekend, turning into nationwide demonstrations against the government’s handling of the pandemic as anger boiled over. It is yet unclear how authorities plan to quell the ever-growing unrest given their unprecedented scale, or just how much more widespread these protests will become.

Read more: UK house price growth slows as property sales set to fall

"But this is uncharted territory for president Xi Jinping and the Communist party, and it is making the markets nervous."

Asia-Pacific focused financial firms HSBC (HSBA.L) and Standard Chartered (STAN.L) also took a hit, down 0.68% and 0.31% respectively.

US markets expected to make weak start as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the red.

In Asia, Tokyo’s Nikkei 225 (^N225) slumped 0.42% to finish at 28,162 while the Hang Seng (^HSI) in Hong Kong retreated 1.29% to 17,346. The Shanghai Composite (000001.SS) tumbled 0.75% to 3,078 points.

Read more: UK ‘missing out’ on $500bn semiconductor industry

On Wall Street, stocks closed mixed on Friday but every major index notched weekly gains in a holiday-shortened week.

The Dow Jones (^DJI) gained 0.45% to close at 34,347. The S&P 500 (^GSPC) closed flat at 4,026 points and the tech-heavy Nasdaq (^IXIC) fell 0.52% to 11,226.

Watch: What is a recession and how do we spot one?