Equities in London ended lower on Friday, with miners and other China-exposed stocks hurting the FTSE 100, though a reassuring update from the British Airways parent lifted travel shares.
Broker cuts hurt Greggs and Mitchells & Butler, while investors fretted for Vistry again after the housebuilder warned on profit.
The FTSE 100 index fell 68.35 points, 0.8%, at 8,072.39, fading 1.3% this week. The FTSE 250 closed down 117.45 points, 0.6%, at 20,517.92, but advancing 0.2% this week. The AIM All-Share gave back 3.87 points, 0.5%, at 734.36. It lost 0.6% this week.
The Cboe UK 100 fell 0.9% at 809.75, the Cboe UK 250 lost 0.7% at 17,963.67 and the Cboe Small Companies fell 0.4% to 16,245.82.
In European equities on Friday, the CAC 40 in Paris ended down 1.2%, while the DAX 40 in Frankfurt fell 0.8%.
The pound was quoted at $1.2926 late on Friday afternoon in London, compared to $1.2985 at the equities close on Thursday. The euro stood at $1.0731, down against $1.0791. Against the yen, the dollar was trading lower at JP¥152.62 compared to JP¥153.11.
China on Friday announced a debt package as the Asian nation looks to ignite a slowing economy, though the response from the market was less than positive.
Analysts believe the measures will not boost consumption and more targeted stimulus may be needed.
China said on Friday lawmakers had agreed to raise the local government debt ceiling by $840 billion, opening up new funds for its ailing economy as they eye the possibility of intensified trade tensions with US president-elect Donald Trump.
Policymakers were keeping tabs on the US vote as they gathered in the Chinese capital this week for a meeting of the country’s top lawmaking body.
Brent oil slumped to $73.58 a barrel at the time of the London equities close on Friday, from $74.91 late Thursday.
‘The renewed decline in oil prices comes as hopes fade over the possibility of providing more support packages for the Chinese economy, which reinforces concerns about the future of demand for crude from its largest importers. The declines also come amid concerns about the effects of Trump’s policies that could weaken the Chinese economy and deepen those concerns,’ XS.com analyst Samer Hasn commented.
‘The Standing Committee of the Chinese Legislative Council, after its meeting that lasted throughout the working days this week, approved a package equivalent to $1.4 trillion as part of a debt swap program. However, the disappointment comes with the lack of disclosure of financial measures to support the economy directly, and the debt swap measures will only push the maturity dates of the debts forward, according to what was reported by the Wall Street Journal, citing economists.’
Tracking oil prices lower. Shell and BP fell 1.1% and 2.2%. Miners also struggled, given their exposure to China. Antofagasta fell 6.6%, while Glencore lost 5.0%. Asia-focused lender HSBC gave back 3.5%.
Also on the decline, Vistry slumped 16%.
The housebuilder said the total full-life cost projections for completing 9 out of 46 developments in its South Division, including some large-scale schemes, have been understated by around 10% of the total build costs.
The South Division is one of six divisions in the UK for Vistry, which has 300 developments in total across the group.
The increase in potential costs means a reduction in Vistry’s guidance for adjusted pretax profit.
This was cut by 19% to around £350 million for 2024 from £430 million previously. Adjusted pretax profit in 2023 was £419.1 million on revenue of £4.04 billion.
The company now expects to deliver total completions of around 17,500 units for the full year, reduced from previous guidance of 18,000, though it would represent a 8.2% increase from 16,118 in 2023.
Vistry said it ‘remains confident in its Partnerships strategy and committed to its medium-term targets’. It also said it is committed to its distribution policy, but put a ‘timeframe of delivery under review’.
In that strategy update in September 2023, Vistry said it is targeting returning £1 billion to shareholders ‘over next three years from ordinary and special distributions, alongside the elimination of net debt’.
Mitchells & Butlers fell 7.7% after Deutsche Bank cut the pub operator to ’hold’ from ’buy’. Greggs lost 6.0% after the baker was cut to ’sell’ from ’hold’.
IAG shot up 7.2%, while Wizz Air and Jet2 climbed 10% and 1.7% in a positive read across.
IAG said third-quarter revenue rose 7.9% on-year to €9.33 billion while operating profit rose 15% to €2.01 billion. It said it expects the strong financial performance to continue for the rest of the year.
IAG announced a €350 million share buyback programme.
AJ Bell analyst Russ Mould commented: ‘Revenue growth mixed with stronger margins gave a nice boost to profit, which in turn has driven cash flow and continues IAG’s journey in strengthening its balance sheet. That puts it in a stronger position to crank up shareholder returns or potentially start thinking about making more acquisitions.
‘It’s a radically different situation to three years ago when IAG was struggling under the weight of the global pandemic.’
Gold was quoted lower at $2,685.63 an ounce late Friday afternoon, against $2,697.24 at the same time on Thursday.
US stocks were mostly higher as the dust settles on a busy week state side. Donald Trump win his presidential re-election bid, while the Federal Reserve enacted a 25 basis point rate cut.
Rabobank analysts commented: ‘Trump‘s return to power, backed up by Republican majorities in the Senate and probably the House of Representatives, implies a major shift in US economic policy. Trump is likely to raise tariffs which could cause a rebound in inflation and a slowdown in economic growth. The negative impact on growth could be mitigated by tax cuts and deregulation by a Republican Congress.
‘However, this would increase the budget deficit and reinforce inflation, especially in combination with reduced immigration. For the Fed this means that a pause in the cutting cycle is likely in 2025. This would increase tensions between Trump and Powell and would give the US President additional incentive to challenge the Fed’s independence.’
The Dow Jones Industrial Average was up 0.7%, the S&P 500 added 0.4%, but the Nasdaq Composite was down 0.1%.
Next week’s economic events calendar kicks off in a quiet fashion on Monday, though there is a Chinese inflation reading over the weekend.
The week picks up pace with a UK unemployment reading on Tuesday, US inflation data on Wednesday and eurozone gross domestic product data on Thursday.
Monday’s local corporate calendar has a trading statement from insurer Direct Line.
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