Sector movers: China and US growth concerns weigh on commodity plays

Stocks in the UK ended the session clearly in the red amid growth concerns in China and the US, which resulted in broad-based losses in the commodities space.

On the subject of the former, on Tuesday economists at BofA cut their forecasts for Chinese gross domestic product growth by two tenths of a percentage in 2024 to 4.8% and by the same amount for 2025 and 2026 each to 4.5%.

The downwards revision followed softer-than-expected factory sector survey data published at the weekend.

Big Oil in particular was a drag on the FTSE 350 as a result, November-dated Brent crude oil gave back nearly 4% to end at $73.77 a barrel.

Not lost on investors, the Labor Day holiday in the US marked the end of the summer driving season and associated demand for petrol.

But there was a more general risk aversion in the air ahead of the release of the US non-farm payrolls report for August that would be published at the end of the same week.

Indeed, Tom Lee, head of research at Fundstrat Global Advisors, told CNBC he was anticipating a rebound in hiring Stateside.

However, he believed that investors should be cautious over the next eight weeks, because of concern about the reasons behind Fed rate cuts and the uncertainty around the presidential elections, which he thought could see stocks fall by 7-10% over the next two months.

Yet he also said that he would see such a drawdown as a buying opportunity as, in his opinion, the bottom line was that the current market was strong. .

In the background, there was a fair bit of market commentary on Tuesday highlighting just how bullish retail investors had become, which was considered by some as a good 'contrarian' indicator.

Sell side strategists meanwhile had pushed their stock allocations to a 2.5 year high, BofA analysts said, adding that their Sell Side Indicator was creeping nearer to a contrarian sell signal.

As regards US economic growth, James Knightley at ING said that the latest factory output and orders survey data published on Tuesday had historically pointed to a sharp slowing in GDP growth.

Top performing sectors so far today

Personal Care, Drug and Grocery Stores 4,621.27 +1.03%

Electricity 11,594.63 +0.68%

Industrial Transportation 4,012.60 +0.66%

Tobacco 32,527.58 +0.52%

Non-life Insurance 3,918.58 +0.42%

Bottom performing sectors so far today

Real Estate Investment & Services 2,531.28 -4.58%

Precious Metals and Mining 9,644.32 -3.66%

Industrial Metals & Mining 5,823.25 -3.41%

Oil, Gas and Coal 8,363.69 -2.86%

Chemicals 8,073.19 -2.11%