FTSE 100 eases as China COVID surge knocks energy, mining stocks

FILE PHOTO: A worker shelters from the rain as he passes the London Stock Exchange in London

By Shashwat Chauhan and Shristi Achar A

(Reuters) -The export-heavy FTSE 100 slipped on Monday as commodity stocks fell on concerns about COVID-19 curbs in top metals consumer China, although losses were limited as a weaker pound lifted shares of internationally-focused consumer firms.

The blue-chip FTSE 100 closed the session 0.1% lower, after rising as much as 0.5% during the day.

Energy sector stocks fell 3.3%, while industrial metal miners shed 2% as oil and copper prices dipped on worries about slowing demand from the world's second largest economy. [MET/L][O/R]

Further weighing on crude prices was a report which said that Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase.

"Markets are really moving into safe havens because of China COVID curbs. You're seeing healthcare and utilities being up while the most Chinese sensitive stocks are selling off the most", Patrick Armstrong, chief investment officer at Plurimi Wealth, said.

China is fighting numerous COVID-19 flare ups, from Zhengzhou in central Henan province to Chongqing in the southwest.

Drugmakers AstraZeneca and GSK rose 1.4% and 2.1%, respectively. Unilever, Diageo and British American Tobacco, with significant dollar revenues, gained between 1.1% and 1.8% as the pound fell. [GBP/]

Meanwhile, market participants digested a recent set of hawkish comments from Federal Reserve officials which quashed hopes of smaller interest rate hikes after soft inflation data in October. [FRX/]

"Markets are just kind of waiting for some fresh checklist and there isn't really clear direction in terms of what's happening with the U.S. inflation," said Giles Coghlan, chief market analyst at HYCM.

Investors were also still assessing British Finance Minister Jeremy Hunt's budget speech last week when he unveiled higher taxes and spending curbs in an effort to reassure markets that the government was serious about fighting inflation.

The domestically focussed FTSE 250 index closed the session 0.7% higher.

Among individual stocks, Virgin Money jumped 14.9%, topping the midcaps, after the lender reported a 43% increase in full-year profit as Bank of England rate hikes lifted its finances ahead of a likely prolonged economic downturn.

The world's largest contract caterer Compass Group slipped 1.4% after its underlying operating margin expectations for full-year 2023 fell short of market expectations.

(Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Dhanya Ann Thoppil and Alexander Smith)