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Shares below 5,900 on Asian and Europe economic woes

Published: 13:55 03 Feb 2016 GMT

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London shares dipped below a psychological threshold on Wednesday as downbeat European economic news compounded the negative effect of Asian woe.

The FTSE 100 Index, which was 16 points off in earlier trading, headed south of 5900 to stand 28 points adrift at 5893 by lunchtime following overnight falls for the Shanghai Composite and Japan's Nikkei.

The declines came despite a better-than-expected Chinese Caixin services figure.

But the price of a barrel of Brent crude picked up 1.7% to US$33.3 in early trading, which helped to limit share losses.

In UK economics, the services sector Purchasing Managers Index from Markit and the Chartered Institute of Purchasing & Supply (CIPS) showed a slight uptick in January to 55.6 from 55.5 in December, with any figure above 50 representing growth.

In the eurozone’s services sector, France managed to end its contraction with a rise to 50.3 from 49.8 last month, but that was worse than growth before last year’s Paris terror attacks.

Italy and Spain, meanwhile, slipped to one and 13 month-lows respectively, whilst Germany, which racked up 56.0 in December, fell to a below-expectations 55.0 in January.

In equities, stockbroker Hargreaves Lansdown (LON:HL.) fell 45p, or 3.4%, to 1272p after it said margins had dropped despite higher first-half profits.

Drug group GlaxoSmithKline (LON:GSK) was 29p healthier at 1455p on unconfirmed market rumours that it could break itself up or may face a takeover from the likes of Reckitt Benckiser (LON:RB.) or Procter & Gamble (NYSE:PG). The company was also due to report fourth quarter results at midday.

Blood flow monitoring system developer Deltex Medical (LON:DEMG) backtracked 0.25p to 4.38p after confirming it intends to raise up to £3mln through new convertible loans, a placing and an open offer.

Green Dragon Gas (LON:GDG) exceeded its production target in 2015 and pencilled a rise of a third in capacity this year. Its shares inflated 2.4p to 264.9p.

Shares in Andes Energia (LON:AEN) reversed 0.95p to 16.55p as the South American-focused oil & gas group confirmed total production for December amounted to 3,287 barrels per day.

Investors dug into Kefi MInerals by 0.02p to 0.34p as the gold explorer and developer with projects in Saudi Arabia and Ethiopia has chosen its preferred senior secured lenders for its Tulu Kapi gold project in Ethiopia.

Lower grades knocked revenues at Xtract Resources’ (LON:XTR) Chepica gold mine in the three months to the end of December despite a rise in the amount of ore processed. The shares shed 2.33% to 0.21p.

LONDON OPEN

London shares slipped into negative territory on Wednesday after upbeat Chinese economic data failed to buoy Asian markets.

The FTSE 100 Index fell 16.18 points to 5905 in morning trading following overnight falls for the Shanghai Composite and Japan's Nikkei.

The declines came despite a better-than-expected Chinese Caixin services figure.

US markets fared far worse with the Dow Jones Industrial Average slumping 295 points to 16,154 as oil companies sank under the pressure of weak crude prices.

But the price of a barrel of Brent crude picked up 1.8% to US$33.3 in early trading, which helped to limit share losses.

In UK economics, the services sector Purchasing Managers Index from Markit and the Chartered Institute of Purchasing & Supply (CIPS) showed a slight uptick in January to 55.6 from 55.5 in December, with any figure above 50 representing growth.

In equities, stockbroker Hargreaves Lansdown (LON:HL.) fell 56p, or 4.25%, to 1261p after it said margins had dropped despite higher first-half profits.

Drug group GlaxoSmithKline (LON:GSK) was 0.5p healthier at 1426.5p on unconfirmed market rumours that it could break itself up or may face a takeover from the likes of Reckitt Benckiser (LON:RB.) or Procter & Gamble (NYSE:PG). The company was also due to report fourth quarter results at midday.

Blood flow monitoring system developer Deltex Medical (LON:DEMG) backtracked 0.25p to 4.38p after confirming it intends to raise up to £3mln through new convertible loans, a placing and an open offer.

Green Dragon Gas (LON:GDG) exceeded its production target in 2015 and pencilled a rise of a third in capacity this year, but its shares deflated 1.45p to 261.05p.

Shares in Andes Energia (LON:AEN) reversed 0.81p to 16.69p as the South American-focused oil & gas group confirmed total production for December amounted to 3,287 barrels per day.

MARKET PREVIEW

London’s blue chips are set for early falls after a battering for US and Asian markets overnight.

Spread bet firms see FTSE 100 dropping up to fifty points when trading gets underway to follow a 138 point decline yesterday to 5,922.

US markets fared far worse with the Dow Jones Industrial Average slumping 295 points to 16,154 as oil companies sank under the pressure of weak crude prices.

The price per barrel is back under US$30 per barrel and traders were braced for another bumper set of US stock numbers to send it even lower.

BP and ExxonMobil fell heavily offsetting rises for Google as it became the world’s largest company in market value terms.

Asian markets fared even worse than the US, with declines of more than 3% in Tokyo, 2.6% in Hong Kong and 0.8% in Shanghai.

Fears that Asian economic growth is slowing are behind the recent weakness and especially China, where the Shanghai market has shed 50% of its value in a little over six months.

GlaxoSmithKline leads the companies reporting today with possibility of it being carved-up firmly in the minds of investors.

The maker of drugs, toothpaste, Ribena and Horlicks has been a frequent name in the rumour mill in recent weeks including stories that Johnson & Johnson were interested.

“There has been much talk of a GSK break-up in recent months following a lacklustre strategy day in November,” Liberum Capital analyst Naresh Chouhan said.

Water utility Severn Trent, platinum specialist Johnson Matthey and wealth manager Hargreaves Lansdown also give trading updates.

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