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FTSE 100 muted as Wall Street in the red amid China slowdown fears

FTSE 100 A trader works on the floor of the New York Stock Exchange (NYSE) at the opening bell on August 5, 2022 at Wall Street in New York City. - Stock markets slid Friday as a much stronger-than-expected US jobs report raised the prospect that the Federal Reserve will maintain its aggressive monetary policy to combat inflation. (Photo by ANGELA WEISS / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)
Wall Street stock indices dipped as the FTSE 100 was muted. Photo: Angela Weiss/AFP via Getty (ANGELA WEISS via Getty Images)

The FTSE 100 and European stocks started the week in positive territory only to fall back hours later, with investors worried about a possible Chinese slowdown.

The FTSE 100 (^FTSE) closed flat, while the CAC (^FCHI) in Paris made slight gains to finish 0.18% higher at 6,565 points. In Germany, the DAX (^GDAXI) advanced by only 0.07% to close at 13,805.

On Wall Street, the Dow Jones (^DJI) was muted as the closing bell rang in Europe. The S&P 500 (^GSPC) retreated 0.23% to 4,270 and the tech-heavy Nasdaq (^IXIC) dropped 0.11% to 13,032.

The blue-chip index made a positive start to trading boosted by gains in the US on Friday and despite mixed performances in Asia overnight. But the strong sentiment only lasted for a couple of hours.

The top gainer was RS Group (RS1.L), formerly known as Electrocomponents, amid speculation that it could be in line for a takeover bid.

Pharma group AstraZeneca (AZN.L) gained 2.5% after it said that its breast cancer drug Enhertu had shown positive trial results.

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"The UK market chose to take its lead from Wall Street, notwithstanding the fact that the Bank of England is set to maintain its aggressive interest rate stance in the face of persistent inflation in the UK," Richard Hunter, head of markets at Interactive Investor, said.

"Even so, underpinned by some inflation-resilient sectors, stronger commodity prices, a generous average dividend yield and weaker sterling, the index remains up by 2% in the year to date, in sharp contrast to many of its global peers."

Read more: FTSE 100: Antofagasta share price dips as profits slump on volatile copper price

"Pharmaceutical shares were marked sharply higher in early exchanges, following an announcement from AstraZeneca  regarding the trial success of its breast cancer drug, Enhurtu," he added.

"The news had a positive read across to the rest of the sector in underlining the potential strides which the major pharmaceutical companies are now making, while an oil price which remains ahead by 25% in the year to date gave some further support to the oil majors."

Other blue-chip stocks on the front foot included British Gas owner Centrica (CNA.L) and JD Sports Fashion (JD.L).

The week ahead includes the latest inflation reading from a number of countries including the UK. Deutsche Bank economists expect Wednesday’s headline CPI figure to have risen to 9.8% in July, which would be its fastest pace in four decades and up from 9.4% in June.

Still in London, the Phoenix Group (PHNX.L) hailed a strong start to the year despite a "challenging" economic backdrop.

The FTSE 100 life insurance group struck an upbeat tone on the outlook after cash generation jumped 8.9% to a record £950m ($1.15bn) in the six months to the end of June.

Meanwhile, oil prices were down, with Brent crude (BZ=F) falling to around $94 a barrel.

In Asia, Tokyo’s Nikkei 225 (^N225) advanced 1.14% to 28,871 while the Hang Seng in Hong Kong (^HSI) fell 0.45% to 20,084 after China's industrial production and retail sales data disappointed investors. The Shanghai Composite (000001.SS) closed flat at 3,275 points.

“This weakness in the Chinese economy comes against the struggle to adapt to a zero-COVID policy, which the government shows little sign of relaxing, against a backdrop of rising cases,” Michael Hewson chief market analyst at CMC Markets UK, said.

Read more: FTSE 100: Admiral Group profit halves to £251m

Industrial production grew by 3.8%, lower than the 3.9% figure in June. Retail sales rose 2.7% in July compared with the same period in 2021, below the 5% growth forecast.

China’s central bank has also unexpectedly slashed a key policy interest rate for the first time since January.

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