Stocks in London were down at midday on Wednesday as US financial markets returned from the Fourth of July holiday, amid a risk-off mood following a slew of weak economic data.
The FTSE 100 index was down 41.96 points, or 0.6%, at 7,477.76. The FTSE 250 was down 84.09 points, or 0.5%, at 18,449.70, and the AIM All-Share was down 2.14 points, or 0.3%, at 754.30.
The Cboe UK 100 was down 0.6% at 745.73, the Cboe UK 250 was down 0.5% at 16,160.25, and the Cboe Small Companies was down 0.6% at 13,044.26.
Survey data on Wednesday showed that business activity in China cooled to a five-month low in June.
The Caixin services purchasing managers’ index eased to 53.9 points in June from 57.1 in May. Falling closer to the 50-point no-change mark, it shows growth slowed in the sector. The composite PMI, which weighs services and manufacturing, fell to 52.5 from 55.6.
‘A slew of recent economic data suggests that China’s recovery has yet to find a stable footing, as prominent issues including a lack of internal growth drivers, weak demand and dimming prospects remain,’ noted Wang Zhe, Caixin senior economist.
Pierre Veyret, technical analyst at ActivTrades, said it was ‘no surprise’ to see the appetite for equities taking a hit as the prospect of higher demand from the second-biggest economy in the world faded.
The risk-off sentiment helped boost the safe-haven dollar on Wednesday afternoon. The pound was quoted at $1.2705 at midday on Wednesday in London, down from $1.2728 at the close on Tuesday. The euro stood at $1.0883, lower against $1.0900.
‘The overnight release of Chinese data revealed a slowdown in services activity, bringing back concerns that the post-pandemic recovery in the world’s second-largest economy may be stalling, a scenario that is dollar-positive due to the greenback’s haven status,’ said Ricardo Evangelista, senior analyst at ActivTrades.
Meanwhile, against the yen, the dollar was trading at JP¥144.33, lower compared to JP¥144.46. For ActivTrades’ Evangelista, the dollar’s weakness here showed that the focus of foreign exchange traders is shifting to the release of the last month’s US Federal Reserve meeting minutes.
The US Federal Open Market Committee will publish its latest meeting minutes at 1900 BST. The minutes will be looked at closely by investors who will be hoping to find clues on the likelihood of a rate hike at the Fed’s next meeting at the end of July.
Stocks in New York were called lower on Wednesday, as US markets returned following the Fourth of July holiday and investors nervously waited for the release of the Fed’s meeting minutes.
The Dow Jones Industrial Average was called down 0.4%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 0.5%.
In London, Pearson was the top blue-chip performer at midday, up 2.2%, after UBS raised the education publisher to ’buy’ from ’neutral’.
Legal & General fell 2.0% despite setting out a confident outlook and saying it enjoyed a busy first-half of pension risk transfer dealings.
The financial services and asset management company said it expects to generate over £8 billion to £9 billion of capital over the period spanning 2020 to 2024. It also expects to grow earnings per share faster than dividends per share.
In the FTSE 250, Keller Group was the index’s top-performing stock, up 12%.
The geotechnical engineering firm said it expects its full-year underlying operating profit to be ‘materially ahead’ of market expectations.
‘Trading in the first half has remained strong and we anticipate a record performance in the period,’ it said.
Due to the timing and phasing of certain contracts, it expects profit to be more evenly weighted between the first and second half.
Meanwhile, Redde Northgate was the FTSE 250’s worst performer, down 8.9%.
The commercial vehicle hire firm said that vehicle supply was ‘improving’ but still remained below the high levels of customer demand.
Nonetheless, the company reported pretax profit of £178.7 million in the year ended April 30, up 35% from £132.7 million the year prior. Revenue increased by 20% to £1.49 billion from £1.24 billion.
Elsewhere in London, SIG plunged 12% after it predicted its annual operating profit to be at the lower end of market expectations, as it looked to ‘weak and uncertain demand conditions’ for the rest of the year.
Market expectations for full-year underlying operating profit are between £65.3 million and £84.0 million. In financial 2022, SIG reported underlying operating profit of £80.2 million.
On AIM, Glantus shares more than doubled to 23.80 pence after it confirmed that it is in discussions over its possible takeover.
The accounts payable automation and analytics services provider confirmed that it is in discussions with Accel-KKR and its investee company Basware in relation to a possible cash offer for its entire share capital.
In European equities on Wednesday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.5%.
The eurozone’s private sector fell into a very mild contraction in June, survey data showed, as a sharp downturn in manufacturing offset growth in the services sector.
The Hamburg Commercial Bank eurozone services PMI fell to 52.0 points in June from 55.1 in May. June’s reading was slightly lower than the flash estimate of 52.4.
‘There was a slowdown in new business growth at the end of the second quarter. Having hit a one-year high only as recently as April, the increase in new workloads eased to a marginal pace in June that was the softest in five months. Dragging on demand was a renewed, albeit fractional, deterioration in sales performances to non-domestic customers,’ S&P Global explained.
Overall, the composite PMI - which measures the services and manufacturing sectors - fell to 49.9 from 52.8. The reading was lower than the flash estimate of 50.3.
Closer to home, growth in the UK’s services sector slowed in June, while the private sector as a whole continued to expand.
The S&P Global/CIPS services PMI fell to 53.7 points in June, from 55.2 in May. June’s reading came in line with the previous flash estimate.
‘June data indicated a sustained upturn in UK service sector output, but the rate of expansion eased to its weakest for three months amid a much softer rise in new orders,’ the survey read.
The composite PMI, which measures services and manufacturing, fell to 52.8 from 54.0. It was also in line with the flash estimate.
Brent oil was quoted at $75.96 a barrel at midday in London on Wednesday, down from $76.13 late Tuesday. Gold was quoted at $1,927.18 an ounce, lower against $1,927.60.
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