FTSE 100 rises despite warning from China of financial market bubble

(SHAUN CURRY/AFP/Getty Images)

(SHAUN CURRY/AFP/Getty Images)

The FTSE 100 edged higher on Tuesday morning, rising 0.1 per cent despite a warning from China that global financial markets are in a bubble.

Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, said markets in the US and Europe were trading at high levels which “runs counter to the real economy”.

Mr Guo said: “I’m worried the bubble problem in foreign financial markets will one day go pop.”

US stock markets in particular have surged during the pandemic while unemployment has risen and many businesses have struggled.

Signs emerged over the weekend that China’s economic surge may be running out of steam. The country is one of few to have avoided recession during the pandemic but the latest data showed factory growth slowed in February.

In London on Tuesday, the FTSE 100 index of large company shares rose to 6,591.14. Oil and mining firms were among the biggest fallers with Royal Dutch Shell dropping 1.8 per cent and BP 2.3 per cent. Mining giants Anglo American and Rio Tinto were down 0.6 per cent and 0.4 per cent respectively.

Gambling group Flutter Entertainment, which owns Paddy Power, rose 0.4 per cent after it benefited from people wagering more stuck at home during lockdowns.

Restrictions saw bored casual gamblers turn to online casinos in huge numbers but have also attracted the attentions of regulators concerned about a surge in gambling-related harm.

Flutter’s sales soared more than doubled to £4.4bn in 2020, although pre-tax profits fell from £136m to just £1m largely thanks to costs stemming from its merger with Canadian rival Stars Group.

House builder Taylor Wimpey registered the biggest rise, up 3.4 per cent after resuming its shareholder dividend. Taylor Wimpey said 2021 had started well and the company is expected to benefit further from Wednesday’s Budget.

Rishi Sunak is reportedly planning to unveil a package of measures to further support the housing market, which has boomed in the past year despite wider economic gloom.

New data from Nationwide showed UK property prices picked up unexpectedly in February as the end of a stamp duty holiday approached on 31 March.

Prices in February were 6.9 per cent higher than a year earlier, an increase on the 6.4 per cent rise recorded in January.

The chancellor is widely expected to extend the tax break on property purchases up to £500,000 for a further three months, despite fears that the market may be overheating and continual price rises are unsustainable.

Mr Sunak is also said to be preparing to announce government guarantees on mortgages for buyers with only a 5 per cent deposit.

In the currency markets, the dollar rose against the pound. Sterling was 0.2 per cent lower on Tuesday morning at $ 1.389, earlier hitting a 2-1/2 week low of $ 1.387. The pound was flat against the euro at 86.42 pence.

The pound has enjoyed a strong start to 2021 on the back of optimism about the UK’s Covid vaccine rollout.

“Momentum in sterling has somewhat eased in the past few days, but ever more encouraging data on vaccination and contagion in the UK should continue to underpin hopes of a faster recovery, and keep a floor under the currency,” Dutch bank ING said in a note to clients.

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