UK Market Fell on Tuesday as China Crisis Deepens and Oil Price Drop

January 28
6:45 AM 2016

On Tuesday, trade in London Stock Exchange suffered a huge loss of £20 billion ($28.5 billion) following a turmoil in China's market. The market bounced back on Wednesday as Sage software company and slow raise in oil price.

According to Express, within a short time after trade opening on Tuesday, FTSE 100 dropped by almost 1.5% to sit below 5,800. This undid most of last week's gain, as the London market loss £20 billion ($28.5 billion).

Drop in London and global market was triggered by plunge in China's stock to its two-year low since 2014. The drop shocked the global market as investors in China are feared of the continuing slowdown in the country's economy.

Other major factor that also prompted the stock market drop in London is another fell of oil price to below $30 per barrel. The overflowing supply that continues to override the demand has made the oil price continues to be under pressure. Last week, oil price dipped to the lowest value in 12 years.

UK stock market started to rebound on Wednesday. Led by Sage Group share, FTSE 100 started to bounce back from loss a day before. The software firm Sage Group increased big at 7.5% as the top gainer in London stock exchange.

An analyst in Investec said in a note as quoted by Reuters, "We see a lot of juice left to squeeze out of this orange, and the right team in charge to do it."

In the oil and gas sector, the increase of demand in U.S. has boost the share by 2.6% and oil price started to raise slowly at $32 per barrel. Meanwhile, as Glencore, BHP Billiton and Anglo American made a gain, the mining index increased 1.9%. 

BBC reported that on Wednesday oil price increased 6% to $32.30 a barrel at Brent crude. As a result, FTSE was closed 0.6% higher than on Tuesday. According to BBC, the oil cartel, OPEC has agreed to take action to handle oversupply.

On Monday's meeting, OPEC called for co-operation from non-OPEC oil producing nations. However, after previous OPEC actions have triggered global glut in recent years, it may not be easy for non-OPEC countries to trust OPEC, unless the cartel acted first.

A wild swing still overshadow oil price as the oversupply may continue amidst speculation of reduced of production. An analyst of Phillip Futures in Singapore, Daniel Ang said, "It is going to be very difficult to maintain higher prices."

Following a rough slowdown on Tuesday, London's FTSE bounced back yesterday. Oil price also started to slowly climb as speculation over production cut emerge and increasing demand. 

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