A rating outlook downgrade for China by agency Moody’s triggered a difficult start to the day for the FTSE 100, with the influential mining sector on the decline during early dealings.
Also heaping pressure on the index early Tuesday, lender Barclays fell, while stronger half-year numbers from equipment rental Ashtead were not enough to send that stock higher, with shares still reeling from last month’s revenue caution.
The FTSE 100 index opened down 34.91 points, 0.5%, at 7,478.05. The FTSE 250 was down 9.76 points, 0.1%, at 18,351.49, and the AIM All-Share nudged up just 0.39 of a point, 0.1%, at 714.85.
The Cboe UK 100 was down 0.4% at 746.36, the Cboe UK 250 was up 0.1% at 15,888.39, and the Cboe Small Companies was up 0.5% at 13,476.40.
In European equities on Tuesday, the CAC 40 in Paris and the DAX 40 in Frankfurt each rose 0.1%.
The pound was quoted at $1.2621 early Tuesday in London, flat from $1.2620 late Monday. The euro rose to $1.0831 from $1.0817. Versus the yen, the dollar traded at JP¥147.00, largely unmoved from JP¥147.02.
The Nikkei 225 fell 1.4% in late trade in Tokyo, while in China, the Shanghai Composite lost 1.7%, while the Hang Seng in Hong Kong was 1.9% lower.
In New York on Monday, the Dow Jones Industrial Average lost 0.1%, the S&P 500 fell 0.5% and the Nasdaq Composite gave back 0.8%.
‘Financial markets were feeling the hangover from the November rally yesterday.,’ Swissquote analyst Ipek Ozkardeskaya commented.
Ahead of Friday’s US nonfarm payrolls reading, US data will be in focus. There are a pair of US services purchasing managers’ index readings at 1445 GMT and 1500 GMT, respectively. There is also the latest job openings and labour turnover survey at 1500 GMT.
‘Investors don’t have much time to think of the past and make digestive trades. We will have a flow of new and important economic data – including the US jobs data - which will help the market find fresh direction. Either soft data will cement the Fed rate cut bets or robust data will inject uncertainty and volatility to the market,’ Ozkardeskaya added. ‘In this context, the JOLTS data is expected to show lesser job additions in the US in October. But note that the US jobs market was impacted by strikes last month, last month’s negative impact could turn out to be positive for this month, and the latter could eventually blur the visibility of the health of the US jobs market.’
Tuesday’s economic calendar also has a slew of services purchasing managers’ index readings in Europe, including the eurozone at 0900 GMT and the UK at 0930 GMT.
Already out, data showed China’s services sector modestly expanded in November.
The Caixin purchasing managers’ index rose to 51.5 points in November from October’s 50.4 points in October.
The 50.0 mark separates growth from decline.
Order growth was ‘the best recorded since August’, according to Caixin. Companies have cited ‘firmer underlying market conditions’ as the reason for the better outcome.
A later assessment of the Chinese economy was not as positive, however. The US ratings agency Moody’s on Tuesday downgraded the outlook on China’s credit rating to ‘negative’ from ‘stable’ on the back of rising debt in the world’s second-largest economy.
‘The change to a negative outlook reflects rising evidence that financial support will be provided by the government and wider public sector to financially stressed regional and local governments... and state-owned enterprises, posing broad downside risks to China’s fiscal, economic and institutional strength,’ Moody’s said in a note.
Shares in miners struggled, with China a major buyer of minerals. Anglo American dropped 2.0% in London, while Antofagasta traded 0.9% lower.
Elsewhere, Barclays fell 2.9%. Qatar’s wealth fund is offloading almost half of its shares in the firm, according to Bloomberg on Monday.
Qatar Holding, which is owned by the Qatar Investment Authority, is selling 361.7 million shares in the British firm, according to terms of the offering seen by Bloomberg News.
The sale could see the Qatari vehicle raise as much as £517 million.
The Middle East state invested about £4 billion in Barclays during a series of sales in the 2008 financial crisis, becoming one of its largest backers. It had a 5% stake at the end of 2022, according to a US regulatory filing in January. Monday’s accelerated bookbuild reflects about 45% of that position.
Ashtead fell 3.6%, with shares still stymied by last month’s earnings warning, despite strong half-year results.
The equipment rental firm said demand in North America is strong, despite it cutting guidance last month after being hurt by actors’ and writers’ strikes.
Ashtead said revenue in the half-year ended October 31 increased 16% on-year to $5.57 billion from $4.80 billion. Pretax profit rose 5.5% to $1.25 billion from $1.19 billion. Ashtead raised its interim dividend to 15.75 cents from 15 cents.
The company said it was a record first-half outturn helped by ‘robust end markets’.
Chief Executive Brendan Horgan said: ‘On 20 November we issued a trading update lowering our revenue growth and earnings guidance for the full year to reflect the lower level of emergency response activity related to natural disasters in North America in late Q2 and into Q3 and the longer than anticipated actors’ and writers’ strikes, impacting both the Film & TV business and adjacencies within our Canadian, US and UK businesses.’
Ashtead last month said revenue late in the second quarter and into the third was hit by lower emergency response activity, due to a quieter hurricane season and fewer naturally occurring events like wildfires. Also in both quarters, its Film & TV business was impacted by the recent actors’ and writers’ strikes.
Ashtead consequently revised its full-year guidance downwards last month. It now expects group and US rental growth between 11% and 13%, compared to prior guidance of 13% to 16%.
SSP Group rose 5.1%. The Upper Crust owner reported improved annual results and rejoined the dividend list.
The operator of food and beverage outlets in travel locations declared a 2.5p per share final dividend for the year ended September 30, its first since the pre-pandemic financial 2019.
SSP said annual revenue surged 38% to £3.01 billion from £2.19 billion. Pretax profit jumped to £88.1 million from £25.2 million.
‘While we face into macroeconomic and political uncertainty, we believe that demand for travel will remain resilient and is well set for near and long-term structural growth. In 2024, we are planning for like-for-like sales growth of between 6% and 10%, reflecting the expectation of an ongoing recovery in passenger demand as well as increased spend per passenger including year on year price increases,’ SSP said.
It expects revenue to grow to between £3.4 billion and £3.5 billion, with underlying pre-IFRS 16 operating profit within the range of £210 million to £235 million. Pre-IFRS 16 underlying operating profit in the year just gone totalled £163.7 million, shooting up from £30.3 million.
On AIM, tinyBuild slumped 20%. The video games publisher said it is currently trading below expectations in its fourth quarter, amid an ‘unusually weak’ October. It also said it agreed to settle a litigation, forking out $3.5 million.
tinyBuild said it now expects 2023 revenue between $40 and $50 million, at best a 4.1% decline from the $52.2 million it achieved in 2022.
‘Versus Evil continues to underperform with the delay of three out of four games into 2024,’ it added. tinyBuild announced it would acquire publisher Versus Evil back in November 2021. The founder of Versus Evil made a legal claim against the tinyBuild. Steve Escalante, as well as two other claimants, alleged tinyBuild ‘breached three material obligations’, including not providing Versus Evil with ‘timely capital contributions’ in the 2022 and 2023 financial years.
As part of the legal settlement, tinyBuild has agreed to pay the claimants $3.5 million in cash, in addition to legal costs.
In addition, tinyBuild CEO Alex Nichiporchik has shown a ‘willingness’ to underwrite a future equity fundraise of up to $10 million, the firm said, to shore up its cash position.
Retailer Quiz gave back 17% as it reported weaker half-year results and said Non-Executive Chair Peter Cowgill, once of JD Sports, will lead a strategic review of the firm.
Quiz said revenue in the six months to September 30 fell 14% to £42.3 million from £49.4 million. It swung to a pretax loss of £1.5 million from profit of £1.8 million.
‘The board remains confident that Quiz’s brand is differentiated, and the group’s omni-channel business model remains relevant. However, given the group’s recent trading performance, the board has decided to immediately initiate a thorough review of the strategic options available to the group to maximise shareholder value. This process is being led by the company’s Independent Chairman, Peter Cowgill, supported by the company’s retained advisor, Panmure Gordon,’ Quiz said, adding findings are expected to be announced in the first-quarter.
Brent oil was quoted at $78.93 a barrel early Tuesday, up from $78.53 late Monday. Gold was quoted at $2,033.47 an ounce, up from $2,025.87.
Tuesday’s economic calendar has a slew of services PMI readings, including the eurozone at 0900 GMT and the UK at 0930 GMT.
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