European stock markets on Wednesday were caught between an economic report from the eurozone that was considered too strong and data from China seen as too weak.
The FTSE 100 index was down 8.20 points, 0.1%, at 7,513.19 at midday. The FTSE 250 was down 83.57 points, 0.4%, at 19,016.51 and the AIM All-Share was down 5.74 points, 0.7%, at 834.45.
The Cboe UK 100 was down 0.3% at 751.63, the Cboe UK 250 was down 0.5% at 16,451.08, and the Cboe Small Companies was down 0.2% at 13,051.40.
Sterling was quoted at $1.2164 at midday in London on Wednesday, lower than $1.2243 late on Tuesday in London. Against the yen, the dollar was quoted at JP¥137.48, up versus JP¥136.46.
The euro traded at $1.0501, lower than $1.0519, but bounced off its morning low.
A reading on gross domestic product painted a stronger-than-expected picture of the single currency area’s economy, strengthening the case for further interest rate hikes by the European Central Bank.
According to Eurostat, GDP rose 0.3% in the eurozone during the third quarter from the second. This slowed from quarterly growth of 0.8% in the second quarter, but was higher than a previous estimate of 0.2%.
On an annual basis, GDP rose 2.3% in the third quarter. It topped a previous estimate of 2.1%, but slowed from 4.2% annual growth in the previous quarter.
In European equities on Wednesday, the CAC 40 index in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.4%.
Meanwhile, developments in China on Wednesday were still front of mind for investors.
Authorities in Beijing announced a nationwide loosening of Covid restrictions, following protests against the hardline strategy that grew into calls for greater political freedoms.
Under the new guidelines, some asymptomatic and mild cases of Covid-19 can now quarantine at home, ending a requirement that all positive cases be isolated in centralised government facilities.
However, any boost to sentiment the news might have provided was offset by concerning Chinese trade statistics, which pointed at a slowdown in global demand.
Imports fell 11% year-on-year in November, the biggest collapse since May 2020. Exports fell by 8.7%, the biggest drop since February 2020, when the country was mired in the early stages of the pandemic.
Brent oil was trading at $78.63 a barrel at midday Wednesday, lower than $80.35 late Tuesday. The lower price hit London’s oil stocks, with their morning losses deepening by midday. BP, Shell and Harbour Energy lost 2.2%, 2.1%, and 2.8%, respectively.
GSK was up 8.1%, paring back its morning gains somewhat.
The pharmaceutical firm welcome a US verdict in a lawsuit which had claimed the Zantac heartburn drug caused cancer. The Florida lawsuit featured roughly 50,000 claims. However, the court said plaintiffs failed to provide enough ‘admissible primary evidence’.
‘Yesterday’s ruling reflects the state of that science and ensured that unreliable and litigation-driven science did not enter the federal courtroom... GSK will continue to defend itself vigorously, including against all claims brought at the state level,’ GSK said.
‘This outcome is probably the best GSK could have hoped for given how comprehensively the judge in the case dismissed the plaintiffs’ arguments. While there is some risk of an appeal, and there are other cases outstanding, GSK will be sitting a lot more comfortably than it was before this judgement was handed down,’ said AJ Bell’s Russ Mould.
GSK was the top blue-chip performer, closely followed by its consumer healthcare spinoff Haleon, up 5.0%. Haleon also had exposure to the Zantac litigation, as did Sanofi, which was 8.1% higher in Paris.
Dechra and AstraZeneca rose 2.6% and 1.4%, respectively, in a positive read-across for London pharmaceutical stocks.
Housebuilding stocks were still underperforming, following data on Wednesday showing a 2.3% fall in UK house prices in November. It marks the biggest monthly drop since 2008, according to the latest Halifax index.
Persimmon was down 1.4%, Barratt down 0.6%, and Taylor Wimpey down 0.9%.
In the FTSE 250, greeting card and gift firm Moonpig tumbled 13%.
In its first half ended October 31, Moonpig said pretax profit halved to £9.1 million from £18.7 million a year before. Revenue was flat at £142.8 million from £142.6 million, while selling and administrative costs climbed to £63.0 million from £47.0 million.
‘Trading conditions have become progressively more challenging through October and November,’ Moonpig said, as it cut annual revenue guidance to £320 million from £350 million guided back in September.
‘Some people have clearly been put off ordering cards through Moonpig thanks to the postal strikes, judging by the drop in volumes in September and October. The danger is that the same trend will continue in the crucial November and December period as the prospect of more industrial action looms,’ Mould considered.
Mitchells & Butlers added 10%.
M&B reported annual pretax profit of £8 million in the year to September 24, swung from a loss of £42 million the year before. ‘Excluding the impact of utilities, profits broadly recovered to pre-Covid-19 levels,’ the pub chain said.
Revenue more than doubled to £2.21 billion from £1.07 billion.
Whilst noting a ‘highly challenging’ trading environment, Chief Executive Phil Urban said he is encouraged by the strength of sales growth at the end of the financial year, which has since improved further.
‘The only problem is that cost pressures remain intense. Having modelled various scenarios, the company says in an adverse situation there is a risk that debt covenants would be breached. That’s something for investors to consider before getting carried away by the...rally in its share price today,’ said Mould.
On AIM, MS International was up 13%.
The defence equipment manufacturer said profit multiplied in its first half after Russia’s invasion of Ukraine led to a ‘more attentive audience’ from buyers of military equipment
MS International posted a pretax profit of £3.5 million for the first half ended October 31, multiplying from £770,000 a year ago, as revenue rose by 27% to £42.0 million from £33.2 million.
The company declared an interim dividend of 2.00 pence per share, up 14% from 1.75p.
‘The group has continued to perform strongly, growing our international businesses profitably in the face of these extremely challenging times,’ Executive Director Michael Bell said.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.4%.
Focus in the US is turning to the next Federal Reserve policy meeting, taking place on Tuesday and Wednesday next week.
‘The Fed is set to slow the pace of tightening with a 50 [basis point] rate hike at its meeting next week,’ said Andrew Hunter, senior US economist at Capital Economics.
‘Chair Jerome Powell will seek to ensure the move isn’t interpreted as a dovish ’pivot’, and the Fed’s new projections may show a slightly higher peak in rates than before. But we continue to think a further sharp fall in inflation and economic weakness will convince the Fed to start cutting again before the end of next year.’
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