Stocks in Europe were in the red on Tuesday midday, with FTSE 100 housebuilder Vistry shares diving amid a profit warning, while China’s stimulus was perceived as too soft.
The FTSE 100 index was down 97.08 points, 1.2%, at 8,206.54. The FTSE 250 was down 198.23 points, 1.0%, at 20,654.98, and the AIM All-Share was down 3.81 points, 0.5%, at 735.00.
The Cboe UK 100 was down 1.1% at 821.97, the Cboe UK 250 was down 0.9% at 18,131.13, but the Cboe Small Companies was up 0.2% at 16,693.88.
In European equities on Tuesday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was 0.3% lower.
China said on Tuesday it was ‘fully confident’ of hitting its growth target this year but held off announcing more stimulus measures, leaving markets disappointed.
All eyes were on a news conference led by Zheng Shanjie, head of China’s National Development & Reform Commission, on Tuesday, and investors hoped Beijing would unveil more economy-boosting policies.
But Zheng and colleagues refrained from laying out any new stimulus, instead reiterating that ‘the fundamentals of our country’s economic development have not changed’.
In Hong Kong, the Hang Seng closed down 9.4%.
Stephen Innes at SPI Asset Management said: ‘Tuesday‘s press briefing from China’s top economic planner, the National Development and Reform Commission, was supposed to be the big moment, the one where Beijing unleashed a stimulus bazooka. Instead, it was more of a pop gun.’
‘While officials paid lip service to hitting their economic targets and promised vague ’further support,‘ there was no meaningful policy boost.’
‘It‘s clear the market wanted more, and Beijing’s reluctance to roll out a bigger package is raising serious doubts about the sustainability of this rally. With global risk appetite already on shaky ground, China‘s lack of decisive action could be the pin that bursts the bubble.’
In London, miners suffered on concerns over falling demand China, a major consumer of metals.
Anglo American fell 5.5%, Antofagasta dipped 5.2%, Rio Tinto ebbed 4.8% and Glencore declined 3.9%.
Asia-focused insurer Prudential fell 5.3% while HSBC slipped 3.7%.
The pound was quoted at $1.3095 at midday on Tuesday in London, rising from $1.3082 at the equities close on Monday.
Elsewhere, the euro stood at $1.0984, up against $1.0978. Against the yen, the dollar was trading at JP¥147.99, down slightly compared to JP¥148.03.
Spirits firms were also on the back foot in Europe after China imposed anti-dumping measures on brandy imported from the EU.
Diageo fell 2.0%, while Remy Cointreau fell 7.8% and Pernod Ricard fell 3.7% in Paris.
Russ Mould at AJ Bell said: ‘Importers of brandy coming to China from the EU will now have to put down security deposits of up to 39% of the import value, with it unclear as to when the deposits will be returned. That could push up the price of such products for drinkers, and potentially lead to reduced sales of EU-originated brandy if the consumer seeks cheaper alternatives.’
Elsewhere in the FTSE 100, housebuilder Vistry plunged 22% after slashing profit guidance.
The company said it recently became aware that in its South division, which serves areas such as Kent and the Thames Valley, the total full-life cost projections to complete 9 out of its 46 developments were understated by around 10% of the total build costs. Some of these developments included ‘large-scale schemes’.
‘To add further context to the 9 developments in question, it is important to note that the group as a whole has around 300 developments,’ Vistry added.
The revised cost outlook cuts expectations for 2024 adjusted pretax profit by £80 million. Assumptions for 2025 and 2026 have been cut by £30 million and £5 million. For 2024, it now expects adjusted pretax profit of £350 million, a 16% decline from £419.1 million in 2023.
‘This is a big cut, and we expect the price of the shares to fall significantly today. Investors will be looking to understand how the issue arose, how it is being dealt with and why and how Vistry is confident that the issue is confined to one division,’ analysts at RBC Capital Markets said.
Analysts think the firm now faces the task of rebuilding confidence and reassuring the market that this is a one-off problem.
Davy Research said: ‘The extent to which the group can reassure investors that this is an issue isolated within these sites from one single division will be a significant driver of the stock in the aftermath of this trading update.’
Imperial Brands fared better, with shares rising 4.0% after reporting trading is in line with expectations as it ramped up plans for returns to shareholders.
The Davidoff cigarette and Rizla rolling paper owner said it intends to return around £2.8 billion to shareholders in the financial year to September 30, 2025, compared with £2.4 billion in the financial year just ended.
This will comprise a share buyback of £1.25 billion, up 14% on-year from £1.1 billion, and cash dividends of around £1.5 billion.
Imperial Brands intends to ‘reprofile’ the ordinary dividend for the new year.
‘This will result in two quarterly dividends of 54.26 pence per share to be paid in December 2024 and March 2025,’ it said.
Simon Hales at Citi said the update was ‘reassuring’, with the buyback slightly bigger than the around £1.2 billion investors expected and likely to be ‘well-received’.
‘Moreover, a planned change to quarterly dividends will mean a bigger end of 2024 payout for investors.’
Meanwhile, Senior fell 11% as it warned that the strike at Boeing Co, plus other short-term issues, will hurt its own trading.
The Rickmansworth, England-based engineering firm said the strike at US airline manufacturer Boeing, which is now in its fourth week, will have an ‘inevitable impact on our operating businesses most exposed to this customer, both directly and through its Tier 1 suppliers.’
As a result, Senior expects Aerospace second half performance to be lower than the first half. It still expects on-year growth in the division, however.
In Flexonics, full-year expectations are broadly unchanged, with first half performance higher than the second.
But Greencore rose 6.9% after saying full-year profit will be ahead of market expectations after broad-based growth.
The Dublin-based food processing firm said profit conversion in the fourth quarter ended September was ahead of expectations.
As a result, Greencore anticipates full-year adjusted operating profit to be ‘ahead of current market expectations,’ and in a range of £95 to £97 million. This was raised from £90.5 to £92.5 million, analysts at Shore Capital noted.
Stocks in New York were called higher. The Dow Jones Industrial Average is expected to open up 0.1%, the S&P 500 index is called 0.3% higher, while the Nasdaq Composite is seen rising 0.4%.
Brent oil was quoted at $79.42 a barrel at midday in London on Tuesday, down from $80.41 late Monday.
Gold was quoted at $2,647.81 an ounce, down against $2,649.60.
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