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FTSE 100 nudges lower at close as China growth worries hit stocks

Last updated: 18:00 21 Jan 2019 GMT, First published: 06:22 21 Jan 2019 GMT

Chinese factory
  • FTSE 100 closes lower

  • Miners hit after Chinese growth data

  • Kingfisher in the cellar after RBC downgrade

FTSE 100 closed a tad in the red on Monday as China growth worries kept European indices lower.

The UK's blue-chip index finished down nearly seven points at 6,961.

The FTSE 250 was also lower, off 9.6 points at 18,754.

The German DAX lost over 60 points at 11,136, while the French CAC 40 lost around eight points at 4,867.

"European stock markets are subdued today in the wake of the underwhelming growth figures from China overnight," said David Madden, analyst at CMC Markets UK.

Last year, the figures showed that  the Chinese economy grew by 6.6%, which is its slowest rate since 1990.

"Some traders now feel that China’s offer to eliminate the trade gap with the US is unrealistic, and there is a little less optimism in relation to the US-China trade prospects," said the analyst.

As expected, with  a downbeat growth update from China, mining shares were among those hard at the start of the week. Copper titan Antofagasta (LON:ANTO) shed  2.83% to  830.60p.

Kingfisher plc (LON:KGF) was the biggest laggard on Footsie though, dropping 4.01% to 217.70p  as broker RBC Capital downgraded its rating for the home improvement retailer to ‘underperform’ from ‘sector perform’, saying it expects the earnings downgrade cycle to continue.

3.50pm: Grand Old Duke of York 

The FTSE 100 index had a Grand Old Duke of York sort of day … had the duke been an arthritic sloth.

The top-shares index opened lower, eked out a small gain, dipped into the red and then more or less moved back to Square one.

The index was at 6,969, up a solitary point, having moved between 6,988 and 6,955 during the day.

Kingfisher PLC (LON:KGF) was the worst performing blue-chip, shedding 4.5% at 216.7p after the B&Q owner was downgraded to ‘underperform’ by RBC Capital Markets.

Down among the small caps, Dods Group PLC (LON:DOD) grabbed the wooden spoon, tumbling to 6.375p from 8.275p following a trading statement.

READ Dods warns on profits, blames Brexit uncertainties for “challenging trading conditions” in the UK​

 

2.30pm: Footsie drifting aimlessly

With Wall Street closed today, UK shares continued to drift aimlessly as traders await prime minister Theresa May’s next step in the Brexit saga.

The FTSE 100 was down 3 points at 6,965.

“Optimism over a resolution being found for the US – China trade deal is failing to provide any meaningful cheer and those disappointing GDP figures from China over the weekend certainly aren’t delivering any upside, either,” commented James Hughes at Axi Trader.

“There’s also the ongoing matter of the US government shut down, although signals from the White House do seem to suggest that Donald Trump is willing to offer concessions, whilst the Democrats are in a position to approve some kind of physical barrier on the Mexican border,” he added.

On a quiet day for corporate news, some of the smaller companies grabbed the spotlight.

Former FTSE 250 constituent Thomas Cook Group PLC (LON:TCG) was up 3.5% following reports that it is to build two hotels in China with its joint venture partner, Fosun International.

Fellow airline owner Flybe Group PLC (LON:FLYB) surged to 3.4p from 2.5p overnight on reports that one of its biggest shareholders, Hosking Partners, is looking to block the proposed takeover by a consortium led by Virgin Atlantic.

According to Sky News, Hosking, which has a 19% stake in Flybe, is considering obtaining an injunction to stop the deal from being completed.

1.15pm: Footsie "caught in a pre-Brext Plan B limbo"

Most of the Footsie’s gains have now evaporated in what is rapidly turning into a non-event of a day.

“It appears that both it [the Footsie] and sterling are caught in a pre-Brexit Plan B limbo,” declared Connor Campbell at Spreadex.

“How much May’s latest Brexit gambit will shift the needle is unclear. Going by the Sunday papers, she isn’t going to offer up anything new, instead promising to return to Brussels to renegotiate the Irish backstop to get the DUP and Tory rebels back on board ahead of next Tuesday’s vote.

“What could cause sterling to stop sitting on its hands, however, is whether the reported amendments aimed at preventing the possibility of a ‘no-deal’ exit materialise,” he added.

Meanwhile, the implausibly named Guy Dru Dury, who is head of China at bosses’ pressure group CBI, has weighed in on this morning’s Chinese gross domestic product data, which showed the economy growing at its slowest rate since 1990.

“Whilst China saw a slight slowdown in its economy last year, it remains an economic titan and a vital market for UK PLC.

“The Sino-British economic relationship is a tremendous success story. From services to schools, and Peppa Pig to The Premier League, our countries have a special and integral place in each other’s lives,” he said.

“With British firms making highly successful inroads into a wide range of dynamic regions and cities across the length and breadth of China, the UK is further engraining the economic ties between our two countries. The Chinese consumer market alone is worth over £3.3 trillion, so deepening that relationship will create thousands of jobs in the UK and China, raise living standards and boost productivity in both countries,” he concluded.

The FTSE 100 was up 4 points at 6,972.

11.40am: FTSE 100 edges higher

The FTSE 100 continued to trade sideways without even the prospect of a Wall Street trading session to ginger things up a little.

Wall Street is closed today for the Martin Luther King holiday so if the Footsie is to snap out of its lethargy, it will have to do so under its own steam. Late in the morning, the index was up 15 points (0.2%) at 6,984.

Airline stocks easyJet PLC (LON:EZJ) and International Consolidated Airlines (LON:IAG) were among those lifting the Footsie higher, helped by an easing in the oil price; the former was up 1.7% while the British Airways owner rose 1.6%.

DCC PLC (LON:DCC), the sales, marketing and support services group, shrugged off a price target cut by Goldman Sachs to rise 70p to 6,510p. Goldman reckons the shares are worth 7,900p, having cut its price target from 8,500p.

Product testing group Intertek PLC (LON:ITRK) received a leg-up from a Goldman Sachs (GS) price target changed; GS moved to a price target of 5,600p from 5,330p but remains neutral on the stock, which was trading at 5,094p, up 24p.

Further down the food chain, Victoria Oil & Gas PLC (LON:VOG) was wanted after a production update that showed rising output at its Logbaba project.

The shares were up 5.2% at 16.98p.

 

10.30am: Broker cuts provide a bit of interest on quiet news day

Broker commentary is generating what little excitement there is in a London stock market that is largely becalmed.

The FTSE 100 was up 11 points (0.2%) at 6,979, having moved within a narrow band ranging from 6,955 to 6,986.

US investment bank JPMorgan has been casting its eye over the British financials sector and made a number of target price adjustments.

HSBC PLC’s (LON:HSBA) new price target is 690p, down from 750p previously; the shares trade unchanged at 651.8p.

Standard Chartered PLC’s (LON:STAN) target has been cut to 820p from 900p; the shares were little changed at 623.6p.

Barclays PLC (LON:BARC) eased 0.5% to 165p after JPM pared its price target to 220p from 250p while Royal Bank of Scotland Group PLC (LON:RBS) fell 1.6p to 243.9p after its price target was cut to 290p from 320p.

Lloyds Banking Group PLC (LON:LLOY) eked out a 0.04p gain to 58.04p despite JPM chopping the price target to 80p from 85p.

Funds supermarket platform operator Hargreaves Lansdown PLC (LON:HL.) saw its price target shaved to 1,675p from 1,680p while fund management group Standard Life Aberdeen PLC (LON:SL.) had 15p lopped off its price target at 365p. Hargreaves Lansdown was up 1.5p at 1,836p and Standard Life was up 0.05p at 269.75p.

While the FTSE 100 was just about in positive territory, its baby brother, the FTSE 250, was modestly lower at 18,741, down 24 points (0.1%).

Bookie William Hill PLC (LON:WMH) was among the losers, shedding 4.6p at 171.2p after a trading update.

“Sympathy is likely to be thin on the ground but the latest update from William Hill shows it is not easy being a bookmaker in the UK,” suggested Russ Mould at AJ Bell.

“Confirmation that profit fell in 2018 should not be a major shock give the regulatory challenges faced by the company, perhaps most notably with the cut in maximum stakes on fixed odds betting terminals. This will necessitate a big restructuring of the company’s high street business in 2019.

“Key to its hopes of returning to a sustainable growth path are its efforts to expand in the US, where the rules are generally being loosened, rather than tightened as they are in the UK. It is no surprise to see investment being poured into this expansion,” Mould declared.

 

“An increase in its digital footprint is another way the company is looking to respond to the challenges facing the industry, with the deal to acquire Swedish online gambling site Mr Green close to completion.

“The ‘nobody harmed’ corporate initiative launched last year may be an attempt to pre-empt further regulation but is likely to be met with a good degree of scepticism,” he added.

9.30am: Chinese growth underwhelms

On a freezing morning in London, the FTSE 100 looks like it has seized up.

The blue-chip index was up just 6 points at 6,974 after Chinese economic growth data underwhelmed.

China’s gross domestic product grew 6.4% year-on-year (YOY) in the fourth quarter of 2018 and 6.6% over the whole year.

“The details show that the infrastructure investment is shaping up to be the engine for 2019; however, non-infrastructure business activities will be dismal this year and debt will grow,” reported Dutch finance house, ING.

“Retail sales tell a story of a cautious consumer, one that is not keen to spend on luxury items,” ING noted.

Luxury goods firm Burberry Group PLC (LON:BRBY), which counts China as one of its key markets, was down 0.5% at 1,779p.

As for company-specific news flow, there was not much to be found among the Footsie constituents.

GlaxoSmithKline PLC (LON:GSK) was barely changed after non-executive chairman Sir Philip Hampton signalled his desire to step down from the role. Glaxo has started the search for his successor.

A somewhat more abrupt departure was that of Peter Plumb, the (now former) chief executive of online food ordering facilitator, Just Eat PLC (LON:JE).

The shares edged up 0.8p to 659.2p on the news, which was accompanied by an upbeat trading update.

READ Just Eat says CEO to step down as it raises 2018 guidance and expects growth in 2019

The group said it now expects revenue of £780mln and underlying earnings (EBITDA) of £172mln to £174mln for 2018.

“The departure will raise questions about why it has taken place,” declared Liberum Capital Markets.

“One possible explanation is that there may have been a dispute over the direction of the Latin American strategy. The 2019 adjusted EBITDA loss for Mexico and Brazil looks higher than anticipated, suggesting a high level of investment. it may have been, especially given the recent letter by US investor Cat Rock to the Board that it was felt this was a step too far,” it added.

 

8.35am: Dull start for Footsie

As expected, the FTSE 100 made a subdued start to proceedings, advancing just 10 points to 6,977.97.

The brakes were applied by China’s revelation earlier that it had grown at the slowest annual pace since 1990, eroding the growing optimism that a Sino-American trade deal can be agreed.

Closer to home, traders have half an eye on the Prime Minister’s return to Parliament after last week’s humiliating defeat. However, her Brexit Plan-B is unlikely to much-altered from the outline voted down.

On the market, there was a flurry of downgrades from some of the big shops in the Square Mile.

JP Morgan Cazenove moved to ‘neutral’ on property stocks Capital & Regional (LON:CAL), Shaftesbury (LON:SHB) and Hammerson (LON:HMSO), while Goldman Sachs downgraded to the same call on rat catcher Rentokil (LON:RTO). DMGT (LON:DMGO), the Daily Mail owner, is on Citi’s ‘sell’ list.

However, the big mover (downwards) was Kingfisher (LON:KGF) after the B&Q owner was re-rated as a potential underperformer by mid-ranked house RBC Capital Markets. The stock topped the Footsie fallers’ list after losing almost 4%.

Proactive news headlines:

Redx Pharma PLC (LON:REDX) said it had received the regulatory green light to re-commence its Phase I/II clinical trial of RXC004 on people with solid tumours. It means the company is on track to restart the study as planned in the first-half.

Ariana Resources PLC (LON:AAU) has revealed the results of bulk sampling from the Kizilcukur vein 22 kilometres north of the Kiziltepe mine. Around 22 tonnes of material were sampled, and returned grades of 4.22 grams per tonne gold and 284 grams silver.

Ahead of its annual general meeting today, Avacta Group PLC (LON:AVCT) released a statement highlighting a number of developments in 2018 that validated its technology and business model.

Victoria Oil & Gas PLC (LON:VOG) told investors that its power generation customer ENEO has now doubled its consumption levels, following December’s gas sales deal, and, its power station is operational at full capacity at 30 megawatts. Gas consumption has recently exceeded the ‘take or pay’ level of 4.88mln cubic feet per day, VOG said in a stock market statement.

Scancell Holdings PLC (LON:SCLP) has made two experienced hires as it gears up for its next phase of development. T-cell cloning specialist Dr Samantha Paston is the company’s new head of research, while Dr Adrian Parry will take charge of manufacturing.

Falcon Oil & Gas Ltd (LON:FOG) told investors that a rig contract has been signed for the Stage 2 work programme that will advance its potentially world-class shale project in Australia. The exploration and appraisal programme will include the drilling and hydraulic fracture stimulation of two horizontal wells, with drilling slated to start in June.

Hurricane Energy PLC (LON:HUR) has updated on the Lancaster field’s early production system development where progress has stalled somewhat amid a predicted worsening of weather conditions and an operational hiccup.

Amphion Innovations PLC (LON:AMP) said WellGen, in which it has a 27% stake, has signed a licence agreement for its Black Tea Extract with two drinks companies based in Missouri.

SigmaRoc PLC (LON:SRC) is preparing to open a new ready-mix concrete plant in Jersey as part of an expansion of its Ronez business in the Channel Islands.

Advanced Oncotherapy PLC (LON:AVO) has received a quality standard certification for its LIGHT proton therapy system following an audit by compliance firm Lloyd’s Register.

A mixture of organic growth and acquisitions helped revenue at Alliance Pharma PLC (LON:APH) to surge last year.

Kavango Resources PLC (LON:KAV) has initiated phase two of the airborne electromagnetic survey over the Kalahari Suture Zone in Botswana. It’s anticipated that flying will start later this month.

Royalty specialist Anglo-Pacific Group PLC (LON:APF) has a war chest of US$90mln to invest in new opportunities after a strong end to 2018. Income from its portfolio of mining interests jumped 15% to a record of £48mln-50mln in 2018, said the group.

VAST Resources PLC (LON:VAST) is moving ahead with off-take discussions with additional third parties, after partner Mercuria decided not to go through with a proposed US$5.5mln pre-payment financing.

Live Company Group PLC (LON:LVCG) announced that it has appointed Strand Hanson as the company's nominated and financial adviser with immediate effect.

Connemara Mining Company PLC (LON:CON) announced that, further to the proposed merger between SP Angel Corporate Finance and Northland Capital Partners, it has appointed SP Angel as its nominated adviser and joint broker with immediate effect. The firm said it has agreed to grant SP Angel warrants to acquire up to 2,000,000 ordinary shares of the company at 1.86p each, exercisable for a period of five years.

APQ Global Limited (LON:APQ) has declared a dividend of 1.5p per share in respect of the quarter to 31 December 2018. This dividend is payable on 1 March 2019 to shareholders on the register as at the close of business on 1 February 2019.

6.45am: Subdued start predicted 

The FTSE 100 look set for a subdued start, taking its cue from Asia’s main share markets which trimmed gains after it was revealed China grew at its slowest pace since 1990 last year.

Gross domestic product slowed to 6.4% in the last three months, which means GDP has decelerated for three consecutive quarters in the People’s Republic.

Ahead of the Chinese data, the region’s stocks had been buoyed by optimism that Sino-American trade talks would yield a positive outcome.

Back here in the UK, where the index of blue-chip shares is expected to nudge up just two points to 6,970.33, the Prime Minister presents her Brexit Plan B to the Commons later.

"With cross party talks achieving little towards a workable alternative Brexit, Theresa May is expected to continue with more of the same; she will carry on trying to seek changes to the Irish backstop part to the deal that she negotiated with Brussels," said Jasper Lawler of London Capital Group.

"There is a growing concern among pound traders that there is no Plan–B; just more of the same from May as she runs the clock down."

Investors are braced for another busy week for corporate news with updates from the budget airlines, Burberry (LON:BRBY), Vodafone (LON:VOD), miners Anglo American (LON:AAL) and Antofagasta (LON:ANTO) and retailer Dixons Carphone (LON:DC.) scheduled for the next five trading days.

Significant announcements expected on Monday:

US markets closed for Martin Luther King Day

Trading updates: William Hill PLC (LON:WMH)

Finals: Premier Veterinary Group PLC (LON:PVG)

AGMs: Avacta Group PLC (LON:AVCT)

Economic data: None scheduled

Around the markets:

  • Pound worth US$1.2870
  • Gold worth US1,281.20 an ounce, down US$1.40
  • Brent crude selling for US$62.79 a barrel, down 9 cents

City Headlines:

Financial Times

  • China grows at the slowest annual pace since 1990
  • Temasek steps up pressure over Standard Chartered turnaround – the bank’s Singaporean investor asks for more frequent briefings from emerging markets lender
  • Rolls-Royce in talks to supply Chinese nuclear plant in Essex
  • Ken Griffin, the billionaire founder of the hedge fund Citadel, has bought a Georgian house near Buckingham Palace for £95mln
  • Theresa May on Brexit collision course with MPs - Prime Minister refuses to adjust red lines as Ireland dismisses Fox suggestion on backstop

The Times

  • May blames Corbyn as cross-party talks fail
  • Fund managers are warning that Brexit could lead to more activist investors circling the UK for opportunities to snap up companies on the cheap
  • Sports Direct tycoon Mike Ashley has HMV in his cross-hairs
  • A record 5.8mln households changed their energy supplier last year before the introduction of a government price cap on bills that is forecast to deter switching
  • Patisserie backers wait to hear if trading can go on

Daily Telegraph

  • The “Big Short” investor Steve Eisman has warned that a Jeremy Corbyn government would be a bigger threat to UK markets than a hard Brexit
  • Britain's wealthiest business people are fleeing abroad amid mounting complications over tax, the country’s richest man has warned
  • A flexible office broker backed by former BBC “Dragon” James Caan has picked up £4mln in an investment round led by US property giant JLL as it bids to shake up the way companies find temporary desk space

Guardian

  • Over 23,000 shops and 175,000 jobs to go on the high street
  • Car makers ramp up preparations for a no-deal Brexit
  • UK-listed firms paid record dividends last year, thanks to rising profits, but a report warns that shareholder payouts could take a big hit if Brexit goes badly

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