European markets hovered at the start of trade on Monday, with last week's US inflation elation replaced by concern over disappointing Chinese data.
‘The first impression from the latest set of activity data for July is that there are few signs of a strong rebound in [China's] economy. This is in contrast to the pattern seen in other economies in Asia where private consumption and investments rebounded strongly as they emerged from lockdowns. China's persistent Covid-zero policy is probably a major factor behind this,’ said Commerzbank's Charlie Lay.
The FTSE 100 was up 9.75 points, or 0.1%, at 7,510.64. The FTSE 250 index was up 15.60 points, or 0.1%, at 20,354.56. The AIM All-Share index was up 1.71 points, or 0.2%, at 934.91.
The Cboe UK 100 index was up 0.1% at 750.27. The Cboe 250 was down 0.1% at 17,664.81. The Cboe Small Companies was up 0.1% at 14,495.54.
In Paris, the CAC 40 was marginally lower, while the DAX 40 in Frankfurt edged fractionally higher.
The pound was quoted at $1.2096 early Monday in London, down from $1.2121 late Friday. The euro stood at $1.0240, down from $1.0248. Against the yen, the dollar was trading at JP¥133.42, down from JP¥133.63.
In Tokyo on Monday, the Nikkei 225 ended 1.1% higher, while the S&P/ASX 200 in Sydney rose 0.5%. In China, the Shanghai Composite ended marginally lower, while the Hang Seng in Hong Kong was down 0.7%.
Factory output and retail sales in China edged up in July but were weaker than analysts' expectations, official data showed Monday, as a Covid-19 resurgence and property market jitters cast a pall over hopes for a stronger economic recovery.
The world's second-biggest economy saw a bounce in business activity as some coronavirus restrictions eased in June, but the boost is fading and Beijing remains welded to a zero-Covid policy of snap lockdowns and long quarantines, which has battered sentiment.
But for July, China's industrial production rose 3.8% on-year, down from a 3.9% jump in June, the National Bureau of Statistics said Monday.
Retail sales grew at a slower-than-expected 2.7% from a year ago, down from 3.1% in June, while the urban unemployment rate fell to 5.4%, the NBS said.
The People's Bank of China cut a key interest rate on Monday, surprising market participants.
The Financial Times reported the PBoC cut the medium-term lending rate to 2.75%, a reduction of 10 basis points. The interest rate is used a benchmark for one-year loans provided to the banking system.
‘This is the first cut since January, in a move that indicates the re-emergence of China's downward economic cycle,’ analysts at ING commented.
‘Real estate property construction, home sales and mortgages are just part of the weaknesses we have seen in the Chinese economy. Export demand could also weaken in the coming months. This will derail job growth in China, creating a vicious cycle on consumption and economic growth despite Covid measures becoming more flexible.’
In London, RS Group shares rose 5.5%, the best large-cap performer.
The industrial and electronic products distributor is shoring up its takeover defences, the Times reported over the weekend.
In a market report, the Times reported RS has turned to advisers to bolster defences in case a bid comes. There is also chatter of a £15 per share offer coming, the Times reported.
Elsewhere in London, coal miner Thungela added 6.3%. It hailed a record first half performance.
Revenue in the six months to June 30 more than doubled to R 26.18 billion, about £1.33 billion, from R 10.05 billion.
It declared a R 60 interim dividend per share, having not declared one a year earlier.
‘Demand for affordable energy sources such as thermal coal escalated amid the energy security crisis which was exacerbated by the escalation of the Russia-Ukraine conflict. Coupled with supply constraints in major coal producing regions, this resulted in the price of thermal coal increasing to unprecedented levels,’ Thungela said.
‘Notwithstanding the impact of the rail performance on export equity sales volumes, we achieved record adjusted operating free cash flow of R 8.9 billion.’
Treatt shares tumbled 29% as the natural extracts and ingredients supplier warned on annual profit, amid accelerating inflation, weaker margins due to foreign exchange volatility and Covid-19-hit subsidiary in China.
Treatt now expects pretax profit before exceptional items to land between £15.0 million and £15.3 million for the full-year. In its results for the half-year ended March 31, it said it was on track to deliver profit in line with consensus of £21.7 million.
On AIM, Velocys jumped 11%, as it expects a US climate bill to be a tailwind. The bill will support financing for the firm's US sustainable aviation fuel reference project, it said.
‘Subject to becoming law, this landmark piece of legislation allocates approximately $369 billion to reducing greenhouse gas emissions and incentivises expanded production and use of domestic clean energy. Sustainable aviation fuel tax credits are an integral part of the act, together with other incentives and mechanisms to accelerate the deployment of advanced fuel technologies, generating non-fossil fuels with a significantly reduced carbon intensity,’ Velocys explained.
‘SAF is the only current commercially scalable decarbonisation route for the aviation sector. Multiple pathways to SAF production are needed to satisfy the aviation industry's decarbonisation targets towards 'net zero'. Velocys continues to provide its clients with integrated extensive IP-protected technology enabling the production of synthetic aviation fuel from a variety of sustainable feedstocks with ultra-low to negative carbon intensity.’
A divided Congress gave final approval on Friday to a flagship climate and health care bill, handing US President Joe Biden a back-from-the-dead triumph on coveted priorities that the party hopes will bolster their prospects for keeping their House and Senate majorities in November's elections.
The House used a party-line 220-207 vote to pass the legislation, prompting hugs among Democrats on the House floor and cheers by White House staff watching on television.
The measure is but a shadow of the larger, more ambitious plan to supercharge environment and social programmes that Biden and his party unveiled early last year.
Its pillar is about $375 billion over 10 years to encourage industry and consumers to shift from carbon-emitting to cleaner forms of energy. That includes four $4 billion to cope with the West's catastrophic drought.
Brent oil was quoted at $96.53 a barrel early Monday, down from $97.91 at the London equities close on Friday. Gold was quoted at $1,789.05 an ounce, down from $1,797.13.
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