By Chris Dorrell
London’s markets opened higher on Wednesday morning as a toning down of Italy’s windfall tax on banks calmed investors despite more negative news from China.
The FTSE 100 opened 0.70 per cent higher at 7,579.94 while the midcap FTSE 250, which is more aligned with the health of the domestic economy, opened 0.68 per cent higher at 18,970.35.
Just a day after reporting a slump in imports and exports, the world’s second largest economy slipped into deflation in another blow for its attempts to recover from the covid pandemic.
The consumer price index fell to 0.3 per cent, the first year-on-year decline since February 2021. Producer price inflation also fell. The data paints a bleak picture for the Chinese economy and suggests there could be a prolonged downturn.
“China is now witnessing the actual cost of goods both in stores and at the factory gate falling. It is indicative of a significant slowdown in the Chinese economy, which is beset by high levels of indebtedness,” Steve Clayton, head of equity funds at Hargreaves Lansdown said.
Investors may also be betting on a stimulus package to get the economy moving again.
While Asian markets fell, European markets were buoyed after the Italian government watered down plans for a windfall tax on excess profits made by banks thanks to higher interest rates.
Last night Giorgia Meloni’s right wing government set a cap of 0.1 per cent of total bank assets for the new tax after its surprise announcement on Monday evening sparked a sell-off.
Natwest, Barclays and Lloyds all climbed early on Wednesday as did banks around Europe.
Coca-Cola HBC, the bottle manufacturer, fizzed to the top of the FTSE 100 after recording an increase in profit. Its shares were trading 2.6 per cent higher.
Elsewhere Flutter slumped to the bottom of the FTSE 100 despite recording a 38 per cent increase in revenue.
Its shares were down 5.4 per cent as investors may have been keeping an eye on the company’s debt pile. AJ Bell’s investment director Russ Mould said it was starting to look “a touch burdensome in a rising interest rate environment”.
