• • FTSE 100 opens lower amid fresh property woes in China.

• • Brent Crude edges back above $94 a barrel as supply concerns loom.

• • Dollar strength amid forecasts high interest rates will linger for longer.

• • Pound weaker after a deeper than expected contraction in the UK services sector.

China’s Property Worries Resume

The twin worries about the ongoing fragility in China’s economy and high interest rates lingering for longer in the United States have quashed hopes of a dose of Monday motivation to start the week. The FTSE 100 has opened in the red, with miners among the companies on the back foot.

The deep problems in the Chinese property sector have bubbled to the surface again provoking fresh unease about the structural faults running though the world’s second largest economy. The sprawling real estate giant Evergrande has run into a roadblock in its attempts to restructure its debt, with expectations of new restructured debt being issued now scuppered by an ongoing official investigation into its major subsidiary, Hengda.

There had been hopes that intricate financial engineering will stop the property sectors woes from overflowing to other sectors, but doubts have crept back in about the long-term effectiveness of this tinkering.

Oil Inches Back Up

So far renewed concerns about the snare of problems in China isn’t having a marked effect on oil, with prices edging up as the focus switches again to supply worries. Brent Crude has headed back above $94 dollars a barrel, having dipped last week on expectations of slowing demand as tight monetary policy in the US looked set to continue. Sentiment appears to be shifting back to the effect of Saudi Arabia and Russia’s production cuts, and as oil prices creep back up worries about inflation do too.

Dollar In Powerlifting Mode

The dollar is back in powerlifting mode as expectations that interest rates will be kept elevated for longer in the face of stubborn inflation have pushed the greenback to levels not seen since March. The dollar index, a measure of its strength against a basket of six major currencies is hovering above $1.05. The pound is being sideswiped by the dollar’s strength but also the UK economy’s weakness.

Closely watched PMI data, indicated that business activity in September shrank by more than expected. Contraction in the huge services sector points to the painful combination of painful inflation and high borrowing costs taking a toll on appetite to spend, indicating that consumer resilience is beginning to wane, and pushing the prospects of recession into sharper relief.

Article by Susannah Streeter, head of money and markets, Hargreaves Lansdown