The FTSE 100 ended lower at the start of the week as its natural resources sector suffered, as increased concerns over China’s struggling real estate market dampened investors’ confidence.
The FTSE 100 index ended down 17.01 points, 0.2%, at 7,507.15. The FTSE 250 fell 38.27 points, 0.2%, at 18,761.43, and the AIM All-Share lost 1.61 points, 0.2%, at 754.96.
The Cboe UK 100 ended down 0.3% at 748.22, the Cboe UK 250 fell 0.4% to 16,470.87, and the Cboe Small Companies added 0.1% to 13,614.41.
Evoking memories of the crisis at Evergrande, Chinese property firm Country Garden warned of multi-billion dollar losses, and missed bond payments. The update deepened concerns over the nation’s heavily indebted real estate sector.
‘This latest calamity is reflective of a recovery which has not lived up to expectations since the world‘s second largest economy ditched zero-Covid measures at the end of last year. The usual catalogue of names with Chinese ties were under the pump including Burberry, Standard Chartered and Prudential. The one silver lining for the West may be a deflationary impact from China’s woes which helps in the battle against inflation,’ AJ Bell analyst Russ Mould commented.
Luxury retailer Burberry fell 0.8%, insurer Prudential also lost 0.8% and lender Standard Chartered declined 0.2%.
Miners also suffered with Anglo American among the worst of the lot, down 3.4%. BP and Shell declined 1.1% and 1.0% as oil prices also weakened in the wake of Country Garden’s woes.
Brent oil was quoted at $86.47 a barrel late Monday in London, down from $86.97 late Friday.
In mainland Europe, the CAC 40 in Paris rose 0.1%. The DAX 40 in Frankfurt added 0.5%.
In New York, the Dow Jones Industrial Average was flat, the S&P 500 up 0.4% and the Nasdaq Composite added 0.7%.
The pound was quoted at $1.2690 late Monday in London, lower compared to $1.2703 at the equities close on Friday. The euro stood at $1.0918, lower against $1.0961. Against the yen, the dollar was trading at JP¥145.31, higher compared to JP¥144.80.
US yields continued to widen, with the 10-year widened to 4.17% around the time of the European equities close, from 4.08% late on Friday.
‘Currently, the market’s focus has shifted to the resilience of the US, which is evident through the increase in back-end yields,’ SPI Asset Management analyst Stephen Innes commented.
‘The dollar has been performing well lately and benefiting from various factors. It’s difficult for the dollar to decrease in value when traders dial in on the US exceptionalism, higher US yields, or even a safe-haven lick. For the dollar to weaken, Europe and China would need to show better growth, and US inflation would need to be squashed. However, if the Fed surprises and turns more doveish than expected, this could break the current trend.’
A stronger dollar kept a lid on gold, which faded to $1,909.82 an ounce late on Monday from $1,916.88 on Friday.
Back in London, Watches of Switzerland Group rose 5.8%, shaking off a wider malaise for luxury retail in the wake of the troubling developments in the Chinese property sector. Analysts at Shore Capital Markets believe WOSG is ‘well positioned to gain from sector trends,’ following Tapestry’s acquisition of Capri.
Last Thursday, Tapestry, the New York-based owner of lifestyle brands including Coach and Kate Spade, said it will acquire Michael Kors parent company Capri for $8.5 billion.
On The Beach surged 15%, with UK holidaymakers flocking to Turkey and Egypt to take advantage of favourable currency exchange rates.
The travel company said the number of bookings it has received for summer trips to those destinations is more than double the level from 2019, before the coronavirus pandemic.
It partly attributed this to the fall in the value of the Turkish lira and Egyptian pound against sterling over that period.
Glantus jumped 55% after the Dublin-based provider of accounts payable automation and analytics services agreed to a takeover from Basware.
Basware is a company focused on accounts payable automation, which facilitates a solution designed to enable touchless invoice processing for companies.
Basware will pay 33.42 pence per Glantus share, a hefty premium to the 11.2p closing price on July 4 before takeover discussions were first announced. It is also a 67% premium to Glantus’s closing price on Friday.
It gives the company a valuation of £17.8 million on a fully diluted basis, and implies an enterprise value of £29.5 million.
Harvest Minerals shares dropped 26%, after it downgraded its 2023 sales target for its application fertiliser KP Fertil.
The London-based fertiliser producer with operations in Brazil said it now aims to sell 70,000 tonnes of KP Fertil during 2023, down from its revised target of 120,000 tonnes set in June. Back in April, the company said it was on track to achieve its original target of 200,000 tonnes.
Tuesday’s economic calendar has a gross domestic product reading from Japan and retail sales from China overnight. There is a UK unemployment reading at 0700 BST, before US retail sales at 1330 BST.
The local corporate calendar has half-year results from Legal & General and Just Group. Bookmaker 888 also reports interim numbers.
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