China deflation hits miners as FTSE opens lower, Begbies Traynor sees insolvencies increasing, Rightmove reports house price fall and tiny UK stock surges after hiring ex-Tesla trio

“The FTSE 100 started the week on the back foot, dragged lower by the mining sector as figures from China over the weekend showed the economy swung deeper into deflation,” says AJ Bell Investment Director Russ Mould.

“An indicator of depressed domestic demand and a very different story to the inflationary pressures faced in the rest of the world, the data inevitably hit the miners given the world’s second largest economy is such a rapacious consumer of commodities.

“Later this week we have inflation figures from the US and a monthly GDP reading from the UK before the Federal Reserve and Bank of England deliver their latest decisions on interest rates on Wednesday and Thursday respectively.

“Both are widely expected to keep rates on hold so any interest is likely to be on the messaging which accompanies these decisions and if there are any split opinions. The market is now pricing in material rate cuts for 2024 – will Jerome Powell and his counterpart Andrew Bailey take the opportunity to temper these hopes?

“Corporate recovery firm Begbies Traynor saw a 17% increase in the number of businesses going insolvent in the UK in the six months to the end of September and in worrying signs for the UK economy it expects this trend to continue through the remainder of its financial year.

“The latest figures from Rightmove revealed a 2% month-on-month drop in UK house asking prices which, crucially, was above average.

“While the outlook for the property market has brightened a touch in recent weeks as mortgage rates have come down, the Rightmove report shows it remains tinged with gloom.”

Tesla / DG Innovate

“Most people will have never heard of DG Innovate yet the stock was certainly shouting from the rooftop as the market opened. Initially surging by 180% in value, this tiny company delivered the type of news that sends small cap investors into a frenzy.

“The research and development company looking to develop next-generation batteries and electric motors has appointed three executive directors, all of whom used to work for Tesla.

“Inevitably, when you see a small business appoint ‘heavyweight’ individuals there is speculation it will lead to a takeover by one of their contacts. The fact they’re linked to Tesla is the cherry on top as it implies to investors that this little-known company could eventually be gobbled up by the electric car giant. This is pure speculation but that’s how many investors operate.

“In such situations, investors look for a strong narrative around a stock and get carried away. Stirring the pot was an equity research group saying the shares could ‘5-10 bag into New Year’, namely increase by five to 10 times in value. That comment doesn’t appear to be based on any concrete analysis.

“More noteworthy is that DG Innovate has raised £2.4 million – more than half the company’s value as of last Friday. This money will be used to advance existing projects; however, the new directors have already indicated they will use DG Innovate as a roll-up vehicle for acquisitions in the electric mobility and energy storage space. That implies we could see a succession of fundraises in 2024.”

These articles are for information purposes only and are not a personal recommendation or advice.