- FTSE 100 falls in negative territory
- Chinese retail sales, output numbers below forecast
- US markets expected to open lower
FTSE 100 slipped to lows for the session ahead of an expected weak restart on Wall Street today.
The lead index had earlier made a bright start to the day but disappointing economic data from China and the likelihood of opening losses in the US saw that enthusiasm evaporate.
By 2pm the FTSE 100 was trading down 32.13 points at 7,468.76 and the FTSE 250 was down 3.14 points at 20,335.82.
US stocks were seen starting the week on a sour note, giving up some of their recent gains, after softer economic data from China renewed concerns that global economic activity may be waning.
Stocks enjoyed a good showing last week after a drop in the headline US inflation rate stoked expectations that rate-setters in the world’s biggest economy will likely scale back on future interest rate hikes.
12.50pm: CT Automotive warns
CT Automotive warned on Monday that despite first half revenues being ahead of expectations that gross margins were lower than expected.
The supplier of interior components to the global automotive industry said this reflected two factors: 1) Covid-related lockdowns in China in H1 2022 and the associated disruption to freight meant the group had incurred around $1.6mln of additional freight costs; and 2) inflationary cost pressures and a shortage of labour has led to the group's UK manufacturing facility becoming loss-making, impacting H1 gross margin by c. $1.7mln.
As a result, CT has closed its UK manufacturing operations, which accounted for c.5% of group revenues.
Analysts at Shore Capital now forecast a first half EBIT loss of $7mln EBIT loss and $21mln of net debt (exc. leases).
12.00am: FTSE falls into negative territory
he FTSE 100 fell into negative territory by midday reflecting weaker than expected economic data from China and the likelihood of a weak restart in the US this afternoon.
At 11.55am the blue chip index was 7.19 points lower at 7,493.70 while the broader FTSE 250 was 23.74 points higher at 20,362.70.
US stocks were seen starting the week on a sour note, giving up some of their recent gains, after softer economic data from China renewed concerns that global economic activity may be waning.
Stocks enjoyed a good showing last week after a drop in the headline US inflation rate stoked expectations that rate-setters in the world’s biggest economy will likely scale back on future interest rate hikes.
Futures for the Dow Jones Industrial Average were trading 0.5% lower pre-market on Monday, while those for the broader S&P 500 index were also down 0.5%, and contracts for the tech-laden Nasdaq-100 lost 0.6%.
“European and US futures are trading lower as traders are picking up the momentum from Asia, where trading has seen soft, said Naeem Aslam, chief market analyst at avatrade.com.
The falls came even as China’s central bank delivered a surprise interest rate reduction.
“The bank has taken this action to revive and stimulate growth as the country’s housing sector has seen a serious downtrend, and other COVID-related lockdowns aren’t helping,” Aslam added.
A run of soft economic data from China, the world’s second-biggest economy, added to the caution.
“We are not seeing much risk-on rally today because the Chinese retail sales data failed to impress investors and traders as the data came well below the market expectations and printed the reading of 2.7%. against the forecast of 6.3%. The industrial production number, year-on-year, also fell short of expectations, with the reading of 3.8% against the reading of 4.5%,” said Aslam.
The broad-based deterioration in economic data spooked investors already worried about the likelihood of a recession in many parts of the world.
Looking ahead, US retail sales data due out on Wednesday will be closely watched for signs of any waning in consumer spending.
“Traders expect to show a further slowdown than the expectation; the forecast is for 0.2%, while the previous reading was 1.0%,” said Aslam. “And finally, and more important, is the FOMC Meeting Minutes, which will gather a lot of attention among traders and investors who will like to know what the Fed thinks about their monetary policy reading after an encouraging reading from the inflation and labor market."
The Fed minutes are also due on Wednesday.
11.15am: FTSE 100 heads back to opening levels
FTSE 100 slipped back to its opening levels by mid-morning with caution following weaker than expected Chinese economic data and with investors looking ahead to UK jobs and inflation reports later this week.
Chinese retail sales and output figures were both weaker than expected.
By 11.15am the lead index was trading down 0.42 points at 7,500.47 with the FTSE 250 up 31.14 points at 20,370.10.
US futures were also trading lower suggesting US markets may fail to build on recent gains with a number of key results due this week across the pond as well this week.
Shares in Next Fifteen rose 1.77% to 976p after it said its acquisition of advertising agency M&C Saatchi has received two key regulatory approvals.
Next Fifteen said it received approvals under the UK National Security & Investment Act 2021 and the Australian foreign investment regulatory framework.
Backing from the Committee on Foreign Investment in the US remains and this is expected early in the fourth quarter.
M&C Saatchi's board had originally agreed in May to the Next Fifteen deal, but in June they changed their mind after Next Fifteen's share price tumbled, causing the offer's value to drop significantly.
10.15am: FTSE slips after bright start
FTSE 100 remained cautiously higher with disappointing economic data in China dampening the mood.
At 10.10am the lead index was up 12.01 at 7,512.90 with the broader FTSE 250 up 23.51 points at 20,362.47.
“Signs that some of the inflationary pressures in the economy may be easing continue to drive gains for stocks, with the FTSE 100 higher on Monday,” says AJ Bell financial analyst, Danni Hewson.
“While in global terms surging prices may be starting to ease, spiralling energy costs in the UK mean it could take longer to get over the peak of inflation, and data later this week may offer some clues as to the exact trajectory.”
“Chinese stocks were lower as there was further evidence of the harm the country’s zero-Covid approach is doing to the economy in the short term.
“This has obvious implications for global growth and, in particular commodities demand, and in this context it was no surprise to see shares in the big mining firms slip a little in early trading."
RS Group PLC (LSE:RS1) topped the FTSE 100 risers (up 5.7% to 1,145.50p) after The Times reported over the weekend that it could be the subject of a takeover approach.
The Times highlighted speculation of a bid of up to 1500p, a hefty premium to its current share price.
9.50am: No treats in store as Treatt warns on profits
Shares in Treatt PLC, the fragrances and flavoring manufacturer, plunged 32% to 256p after it warned that full year profits would be below expectations.
The group said it now expects profit before tax and exceptional items to be between £15.0mln and £15.3mln reflecting lower consumer demand, foreign exchange rates, inflation and lockdowns in China impacted its margins.
The company’s tea category will be particularly hit as lower consumer confidence has impacted demand for that category, leading to lower year-on-year sales.
Peel Hunt pointed out the that new forecasts compared to consensus expectations of £21.7mln but it said most of these adverse factors should prove temporary.
The broker reduced its price target to 800p but retained a buy rating.
9.00am: FTSE 100 positive but slips from early highs
TSE 100 failed to hold strong early gains and slipped back close to parity as disappointing economic data in China took the shine off further gains in the US on Friday.
At 9.00am the lead index was trading 11.42 points to the good at 7,512.31.
Richard Hunter, head of markets at interactive investor, said “Economic news from China threatened to spoil the party after US markets staged a strong rally at the end of last week.”
“Amid geopolitical tensions as a delegation of US lawmakers arrive for a further trip to Taiwan, Chinese economic data revealed the ongoing impact of Covid-19 lockdowns and an escalating property crisis.”
“Retail sales and industrial output both rose, but by less than expected in July, alongside a disappointing showing from bank lending.”
But he said “the UK market chose to take its lead from Wall Street, notwithstanding the fact that the Bank of England is set to maintain its aggressive interest rate stance in the face of persistent inflation in the UK.”
AstraZeneca PLC (LSE:NASDAQ:AZN) shares rose 2.1% to 10,931p as the pharmaceuticals group said that positive high-level results from a new trial of its Enhertu breast cancer drug had demonstrated a "statistically significant and clinically meaningful improvement" in progression-free survival.
AstraZeneca said the DESTINY-Breast02 Phase III trial on Enhertu, jointly developed and commercialised with Daiichi Sankyo, also met its key secondary endpoint of improved overall survival.
But housebuilders, Berkeley Group Holdings PLC (LSE:BKG) (down 1.35%), Bellway (LON:BWY) (down 1%), Taylor Wimpey (LON:TW) (down 0.5%) and Barratt Developments (LON:BDEV) (down 0.5%) all fell following a report from Rightmove that house prices slipped in August.
8.15am: London upbeat in early trading
FTSE 100 makes a positive start to trading boosted by gains in the US on Friday and despite mixed performances in Asia overnight following disappointing Chinese retail sales and industrial output figures.
At 8.15am the lead index was trading 35.03 points higher at 7,535.92 with the broader FTSE 250 up 47.07 points at 20.386.03.
Latest data from online property website Rightmove showed the first fall in UK house prices this year with the average price of property coming to market down to £365,173 – down 1.3%.
However, Tim Bannister, Rightmove’s director of property science, says: “A drop in asking prices is to be expected this month after a frenzied two years and many would-be home movers become distracted by the summer holidays.”
“Indeed, for those that can, this may be their first summer holiday abroad since before the pandemic.”
Bannister also pointed out that price growth for the year would still be 7%.
The number of properties currently on the market to buy is down 39% on pre-pandemic levels but despite the lack of instructions new listings rose 12% compared to the same time last year but were down 6% compared to 2019.
Bannister also said the recent interest rate increases by the Bank of England were “not having a significant impact on the number of people wanting to move.”
7.30am: FTSE 100 seen higher
London markets are expected to open higher on Monday following gains in the US on Friday and following the surprise news that China has cut a key interest rate, in a bid to boost its stuttering economy, following weaker than expected retail sales and industrial output figures.
Investors will also have one eye on UK jobs and inflation reports due out later this week to see whether there are signs of a slowdown in the jobs market or in prices growth.
Spread betting companies are calling the FTSE 100 up by around 35 points.
Michael Hewson chief market analyst at CMC Markets UK said: “Despite the slow drip feed of negative headlines of rising gas prices, and the supply chain challenges thrown up by the heatwave in Europe, there’s been little appetite to drive stocks lower in recent weeks.”
“Asia markets have got off to a positive start to the week, with the latest retail sales and industrial production numbers for China showing an economy that still appears low on confidence when it comes to consumer spending, and economic activity more broadly.”
“This weakness in the Chinese economy comes against the struggle to adapt to a zero-covid policy, which the government shows little sign of relaxing, against a backdrop of rising cases.”
“Problems in the property sector also aren’t helping, where many home buyers are halting mortgage payments in protest at delays to the completion of new homes.”
“In June we saw the effects the zero-covid policy has had on the Chinese economy, with a -2.6% contraction for Q2, although we have started to see some signs of a pick-up in economic activity, albeit from a very low base.”
“This morning’s retail sales numbers for July have confirmed how fragile this confidence still is, rising 2.7% well below expectations of 5%, and weaker than in June.”
“Industrial production has been more robust and recovered much better, however even here economic activity disappointed in July, slipping back from 3.9% in June, to 3.8%.”
In London, on a quieter day for company results, Phoenix Group announced half year figures which showed strong cash generation of £950mln against £872mln in the six months to June 2021.
The FTSE 100-listed closed book life insurer, said it was now confident of delivering at the top-end of its £1.3bn-to-£1.4bn target range for the year.
New business long-term cash generation was a record £430mln in the period and more than double the first half of 2021 at £206mln.
7.00am: FTSE 100 set to open higher
FTSE 100 set to start the week in positive fashion following gains in the US on Friday.
Spread betting companies are calling the blue chip index up by around 32 points.
The Dow closed Friday up 424 points, 1.3%, at 33,761, the Nasdaq Composite jumped 267 points, 2.1%, to 13,047 and the S&P 500 added 73 points, 1.7%, to reach 4,280.
The benchmarks ended the week on a high note, clinching the fourth-straight winning week for the Nasdaq Composite and S&P 500. Investors have reacted positively to CPI and PPI data released this week that suggested inflation may have already peaked.