UK Stocks Struggle Amid Global Economic Concerns

An examination of underperforming stocks in the FTSE 100 index shows some concerning signs for the global economy, but can UK stocks rebound?

Similar Trends

The FTSE 100 index in the UK has not been immune to the broader softness in global stock markets seen at the start of September, falling more than its German counterpart but outperforming the pan-European Stoxx600 index. With the services sector remaining resilient but economic activity easing since the election, investors appear to be factoring in a moderate easing of BOE policy. However, a closer look at which stocks have gained and lost ground over the last 30 days paints a more worrying picture. While some stocks have recovered from the early April decline, others have remained stubbornly lower and fallen even further.

The list of underperforming stocks shows a heavy representation of commodity-focused companies, such as Shell and BP, and miners like Fresnillo, Antofagasta and Rio Tinto. The recent weakness in crude oil, which left WTI at a 9-month low, can explain the drop in oil majors. However, broader weakness across commodities suggests markets are concerned about future economic growth. Copper prices are also lower, implying the loss of investor interest is not solely related to the energy transition. Slower economic development in China and Europe weighs on demand for raw materials, including copper and steel. Without improving the economic outlook, miners may remain among the worst performers on UK indices.​

Other Concerns

Burberry was the worst performer over the last month. This followed a downgrade announcement that it would exit the FTSE 100 index along with EasyJet, with the latter escaping relegation just recently to maintain its position after re-entering the index in early 2024. Its stock price has fallen over 70% from highs and is now at levels seen around five years ago. The company has faced numerous challenges from the current economic environment, negatively impacting luxury retailers.

Those usually unaffected by inflation who spend more appear increasingly reluctant to open their wallets due to worries about future economic conditions. This reluctance is primarily seen in China, historically a key market for luxury goods over the past two decades. China did not meet GDP expectations in Q2, and additional indicators such as PMIs since then have suggested it is not seeing a strong recovery. Until such recovery occurs, the worst-performing stocks in the FTSE100 may remain so in the coming months.

EasyJet Bottomed Out?

EasyJet's share price may have found a floor in early August when it reached 410 pence after stabilising around the lower boundary of an upward trend channel commencing around 275 pence. The rejection could lead to the share price increasing beyond 600 pence to reach the upper limit of the channel. Key resistance levels are seen at around 520, 560 and 590 pence, with a short-term hurdle at 500 pence, raising the potential for an inverse head and shoulders(H&S) pattern. Conversely, if the share price fell below 445 pence and revisited recent lows, this could open the door to 350 pence, risking further decreases towards 300 pence.​

Source: SpreadEx / EASYJET

Key Takeaways

​An examination of underperforming stocks in the FTSE 100 index showed signs of weakness in the global economy. Stocks like Shell, BP, miners, and luxury brands underperformed, reflecting concerns about future economic growth in China and Europe, which weighed on commodity demand. Burberry was the worst performer over the past month due to challenges in the luxury sector. EasyJet's share price stabilised, but further recovery depends on improvements in the economic outlook and whether it maintains its FTSE 100 position.​