• FTSE 100 closes down 64 points
  • China slowdown spooks industrial commodities plays
  • Gold prospers as investors go “risk-off”

5pm: FTSE 100 closes firmly in red

FTSE 100 index closed firmly lower on Monday as sentiment on both sides of the Pond was hit by weak Chinese data.

The UK index of the biggest shares closed down over 64 points, or 0.9%, at 7,153, off the session peak of 7,218 and above the low of 7,117.

Unsurprisingly, commodity giants were among the big losers. Glencore shed 2.12% to 329.70p. Evraz lost 2.75% at 572.20p.

On Wall Street, the Dow Jones shed 80 points at 35,435. The broader based S&P 500 lost around 17 at 4,450. The Nasdaq plunged over 139 points at 14,683.

“With Chinese industrial production growth down to a 10-month low, it comes as little surprise to see commodity stocks weakening to the detriment of the FTSE 100. With Chinese output growth falling and central government continuing to warn of elevated material prices, investors are likely to see plenty of volatility in the months ahead,” said Joshua Mahony, senior market analyst at global online trading group IG.

Looking at US markets, he added: “The decline in yields has done little to boost growth names, with the Nasdaq on the back foot thanks to a circa 5% decline in Tesla shares.”

3.55pm: FTSE down 83 points

About the best you can say about the Footsie’s performance today is that it hasn’t suffered a triple-digit fall. Yet.

The index is down 83 points (1.1%) at 7,135.

Among the better performers are utility companies Severn Trent (LSE:SVT) PLC and National Grid (LSE:NG.) PLC, up 0.6% and 0.3% respectively, which tells you most of what you need to know about investors attitude today towards risk.

Another favourite of the risk-averse, gold, is also on the up, rising US$11.70 (0.7%) to US$1,789.70 an ounce, lifting precious metals miner Fresnillo PLC (LSE:FRES) 1.4% to 808.6p in the process.

Burberry Group PLC (LSE:BRBY), down 4.1%, and Prudential PLC (LSE:PRU), down 3.9%, were the two worst blue-chip performers; both of them are heavily reliant on China for business and today’s data from the People’s Republic did not set the pulses racing.

“We got some indication of a slowdown in the recent China trade numbers last week; however, the extent of the slowdown in the latest industrial production and retail sales in July has prompted some significant weakness in the likes of companies tied to the economic cycle in Asia, and China especially, with the FTSE100 getting hit particularly hard,” reported CMC’s Michael Hewson.

OANDA’s Craig Erlam said the Chinese data overnight is going to feed into the near-term uncertainty in the country “as it desperately tries to get its Covid outbreak under control early”.

“Retail sales, industrial production and fixed asset investment all significantly missed while unemployment was a little higher at 5.1%,” he reported.

“While some of the miss was attributed to weather-related issues, the Covid outbreak and containment measures are going to take a toll as well, creating problems not just for China but trading partners as well. More supply issues and bottlenecks are likely if these measures don’t resolve the issue quickly.,” he added.

2.55pm: Tesla Inc (NASDAQ:TSLA) reverses on reports of auto-pilot investigation

As expected, US stocks have opened mostly lower, with investors perturbed by weak Chinese economic data.

The Dow Jones average was down 266 points (0.8%) at 35,249 and the S&P 500 was 23 points (0.5%) weaker at 4,445.

Glamour stock Tesla Inc (NASDAQ:TSLA) was down 3.0% on reports that it is facing a formal investigation in the US of its hands-free driver system Autopilot after a series of crashes involving parked emergency vehicles.

READ Tesla probed over hands-free crashes involving emergency vehicles

In London, the FTSE 100 was down 87 points (1.2%) at 7,132.

It has not been an auspicious day on which to start the new job for Lloyds Banking Group PLC (LSE:LLOY) CEO, Charlie Nunn.

The shares are off 2.0% at 45.3p, making them the worst performers of the big three UK-focused banks.

2.15pm: We are the property companies who say NIY

The FTSE 100 remains deep in the mire but the FTSE 250 is only halfway into it.

The index of big-cap shares was down 85 points (1.2%) at 7,134 while the mid-cap gauge, the FTSE 250, was down 118 points (0.5%) at 23,670.

Mid-cap Avon Protection PLC (LSE:AVON), which took a battering on Friday after warning of the impact of delays in the receipt of orders, supply chain disruption and a tight US labour market in the second half of its fiscal year, is in the wars again today, sliding 1.9% to 2,092p.

Just Group PLC (LSE:JUST) fell 2.6% to 91.5p after it completed the sale of a proportion of the lifetime mortgages it has up for sale. Just’s current expectation is that the sale of the remaining tranche of loans is likely to occur over the coming weeks.

In other disposal news, mid-cap LondonMetric Property PLC (LSE:LMP) has exchanged on the sale of its distribution warehouse in Thrapston, Northamptonshire, to EQT Exeter for GBP102.0 million, reflecting a net initial yield – which apparently we’re meant to refer to as “NIY” (as in “we are the knights who say NIY”) – of 4.1%.

Outside of the FTSE 250, Custodian REIT PLC (LSE:CREI) has sold a retail warehouse unit in Galashiels, Scotland for 67% more than its book price.

The 31,062 square foot unit was sold for GBP4.5mln, GBP1.8mln ahead of the 30 June 2021 valuation, representing a net initial yield of 5.73%.

Shares in LondonMetric were unchanged while Custodian REIT was up 1% at 103.8p.

1.20pm: Resource stocks out of favour

While miners have caught the eye as the heavyweight stocks to be hit hardest by the apparent economic slowdown in China, it has not been a good day for oil either.

“Oil prices fell more than 1% in early trading today, dropping for a third session after official data showed that refining throughput and economic activity slowed in China in an indicator that fresh COVID-19 outbreaks are hampering the country’s economy,” reports boutique broker and resource stocks specialist, SP Angel.

“After rallying in the first half, crude prices have stuttered since mid-July. The spread of delta, including in key consumer China, has undermined the outlook for consumption as restrictions on mobility are reintroduced

“China has been dealing with its most widespread outbreak since the initial cases in 2020, with fresh lockdowns imposed,” the broker noted.

“Data released this morning showed the nation’s economic activity slowed more than expected last month, with retail sales and industrial output missing forecasts, while unemployment rose

“At the same time, OPEC+ has proceeded with plans to gradually increase production, rolling back the supply curbs it imposed in the early days of the pandemic

“As the market has stuttered in recent weeks, large funds appear to have turned less positive toward US crude futures,” SP Angel said.

According to SP Angel, speculators now hold their smallest outright long positions in West Texas intermediate (WTI) since April 2020. The price of WTI for September delivery is down US$1.19 (1.7%) at US$67.26.

“There are also signs that US shale producers are ramping up activities,” SP Angel noted.

Brent crude, meanwhile, is off US$1.04 (1.5%) at US$69.54 a barrel.

The FTSE 100 was down 83 points (1.2%) at 7,136.

12.10pm: US indices to open lower

Keeping with the risk-off mood of other equity markets, US stocks are set to open mostly lower.

The Dow Jones average is expected to open 99 points lower at 35,416; the S&P 11 points weaker at 4,457; and the Nasdaq 100 43 points worse off at 15,094.

“We can look to Covid-related slowdowns, particularly the spread of delta in Asia, softer-than-expected Chinese data, and the fallout from a very poor University of Michigan consumer sentiment report on Friday. I’d even speculate that the tragedy in Afghanistan is a factor in the downbeat mood,” said Neil Wilson at markets.com.

There’s little US economic data for traders to get het up about today. The Empire manufacturing index, also known as the New York Fed’s manufacturing survey, is about as exciting as it gets, which is to say not very exciting at all but if that sort of thing does float your boat then be aware that the expected reading for August is 28.5, down from 43.0 in July.

” A busier day tomorrow will see the release of the retail sales and IP reports for July, together with the NAHB housing index for July and business inventory data for June,” Daiwa Capital Markets informs us.

In London, the Footsie continues to toil and is down 1% or so, or 69 points (at 7,150), as it has been since mid-morning, more or less.

Royal Dutch Shell (NYSE:RDS.A) has been upgraded to ‘buy’ from ‘add’ by AlphaValue but to little effect as the shares are down 1.9% at 1,411.6p.

Conversely, Big Yellow Technologies Group PLC is 0.9% firmer at 1,534p despite HSBC shifting to a neutral position from ‘hold’, although the price target remains at 1,533p.

11.30am: House prices cool in August

House prices in the UK fell in August for the first time this year, mostly due to a drop in demand for larger homes as the cut to stamp duty continued to unwind.

I’ve looked outside the window to check and it appears the world has not ended. Mind you, I can’t see much, what with all the “for sale” signs on the houses hereabouts.

Property website Rightmove PLC (LSE:RMV) said that asking prices between July 11 and August 7 fell by around 0.3%, weighed down by a 0.8% decline in houses of four bedrooms or more. The slip also marked a reversal from a 0.7% increase in the previous survey in early July.

The housebuilding stocks seem to be taking the news phlegmatically, with the blue-chips down roughly in line with the FTSE 100 index, which is off 69 points (1.0%) at 7,150.

Stock market star Future PLC (LSE:FUTR) shot up 7.2% to 3,950p as it agreed to acquire Dennis, the owner of titles such as Wealth, Knowledge and The Week from its private equity owner for GBP300mln.

10.40am: Reasons to be fearful

There are, to misquote the Upminster kid himself, reasons to be fearful.

“Markets start the week with concerns over the weaker global growth following disappointing Chinese data released in the early hours, a drop in US consumer confidence from last Friday and the continued growth in the Delta variant across the US and other major economies,” said Caxton FX.

So, that’s parts 1, 2 and 3. Any more?

“Also, Afghanistan is weighing on sentiment as the Taliban effectively take control. Oil drops on the back on weak data from China, while cryptos are advancing with Bitcoin,” Caxton added.

The FTSE is down 66 points (0.9%) at 7,153 but JPMorgan, for one, still believes that equities are a buy.

“Despite the increasingly bearish narrative by numerous pundits over the past months, we continue to believe that setup will stay positive into year-end,” the US investment bank said.

“Earnings are delivering much better than most expected. Both Q1 and Q2 reporting seasons have produced significant positive surprises. Since January, consensus projected European EPS [earnings per share] for the year has been revised higher by 16%, the strongest move on record.

“The very supportive earnings showing allowed for some P/E [price/earnings] multiple contraction ytd [year-to-date], from 17.7x to 16.7x forward for MSCI Eurozone,” JPMorgan said.

“It should not be news to anybody that the pace of EPS revisions is peaking, given the extremely high levels, but importantly EPS revisions tended to stay in positive territory as long as composite PMIs [purchasing managers’ index] remained above 54.

“In addition, we look for P/E multiples to generally hold their level, despite some likely move up in bond yields from here. The correlation between bond yields and P/E multiples has, if anything, been more positive than negative,” it concluded.

Meanwhile, bid activity continues to make things interesting in the dog days of what passes for summer.

Wm Morrison Supermarkets PLC (LSE:MRW) is expected to receive a higher takeover offer from its initial suitor, Clayton, Dubilier & Rice (CD&R), reports indicate.

The private equity group, which was given until 20 August to either make a new bid or pull out of talks, started the bidding war with a 230p per share offer in June. US private equity group Fortress is sitting in the box seat with its rival offer of 272p but The Times reports that the City is expecting CD&R to come back with an offer of at least 275p.

Shares in Morrisons are up 0.1% at 280.2p.

Meanwhile, Ultra Electronics Holdings PLC (LSE:ULE) has agreed on a GBP2.5bn takeover offer from aerospace firm Cobham PLC (LSE:COB).

Cobham is offering 3,500p per share plus Ultra shareholders will get to keep the interim dividend of 16.2p declared last month.

Ultra shares were up 5.0% at 3,319.85p.

Elsewhere in the wild and wacky world of aerospace, the board of Meggit PLC has sent shareholders details of the recommended takeover offer from Parker-Hannifin, even while US defence group TransDigm waits in the wings with its possible cash offer of 900p a share.

Meggitt shares currently trade at 816.4p, down 0.3%.

The Takeover Panel said on Monday that the US defence group has until 14 September to “put up or shut up”.

9.50am: All right, me old China? (Not really)

Asia-focused stocks are dragging the Footsie lower following weak retail sales data from China.

The FTSE 100 was down 63 points (0.9%) at 7,155.

Fashion firm Burberry Group PLC (LSE:BRBY) (LON:BRBY), with its heavy dependence on the burgeoning Chinese middle classes to drive its topline growth, was the worst-performing blue-chip, down 2.8% at 2,071.

Mining stocks, equally dependent on the Chinese economy, were prominent among the big-cap losers although BHP Group PLC (LSE:BHP), down 1.6% at 2,286.5p, was less affected than some after announcing it is in talks to sell its petroleum assets.

“Is the oil and gas industry becoming toxic? News that resources firm BHP is closer to an exit from oil to focus purely on its mining operations is the latest sign of investment moving away from crude.

“There is a party potentially willing to take on the assets in Woodside Petroleum – so oil and gas can’t be entirely written off yet; however, it’s starting to feel like the direction of travel is clear as the impact of man-made emissions becomes more tangible,” suggested Russ Mould, the investment director at AJ Bell.

“By exiting the oil business BHP could free up funds to increase its exposure in areas like battery metals and copper where demand from the ‘green’ economy is likely to be particularly robust,” he added.

8.50am: Keys for the Taliban hit sentiment

The FTSE 100 opened the session firmly in negative territory with investors fretting over China’s latest disappointing economic data and the potential geopolitical fallout from Afghanistan.

With the Taliban moving into Kabul, the world is now waiting to see how the West will respond to the collapse with thousands of people fighting to flee the country.

Here in the UK Parliament is to be recalled on Wednesday to discuss the crisis.

“This has been in many ways a chronicle of an event foretold,” prime minister Boris Johnson said.

“We’ve known for a long time that this was the way things would go. This was a mission whose military component really ended for the UK in 2014. What we’re dealing with now is the very likely advent of a new regime in Kabul.”

Asia’s main markets were rattled earlier by retail sales data from China, which seemed to imply the world’s second-largest economy is starting to splutter.

The fear is that the entire region, which has a low vaccination rate, may stall due to the wildfire spread of the Covid delta variant.

On the market, BP (BP.) and Shell (LON:RDSA) were hit by the falling crude oil price, falling 1.7% and 1.4% respectively.

The miners were also marked down early on amid worries over the Chinese economy. Glencore (LON:GLEN) – down 1.7% – led the retreat.

On the FTSE 250 magazine publisher Future (LON:FUTR) advance 5.2%, boosted by the planned acquisition of smaller rival Dennis.

Around the markets

  • Pound US$1.3849 (-0.12%)
  • Bitcoin US$47,534.52 (+1.65%)
  • Gold US$1,777.20 (flat)
  • Brent crude US$69.79 (-1.13%)


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