European shares went into reverse early Tuesday, as the lack of new stimulus in China disappointed the market, while the story in London was Vistry, which slumped by a third after a profit warning.
‘Having persuaded a sceptical audience that it was managing the transition from mainstream to partnership housebuilder, and outperformed the sector by over 30% in the last twelve months, Vistry now has the challenge of resetting credibility which it will achieve if the cost overruns are proven to be limited to these nine sites,’ Stifel analysts commented.
The FTSE 100 index was down 80.90 points, 1.0%, at 8,222.72. The FTSE 250 was down 130.66 points, 0.6%, at 20,722.55, but the AIM All-Share fell 3.33 points, 0.5%, at 735.28.
The Cboe UK 100 lost 0.9% at 823.11, the Cboe UK 250 fell 0.6% to 18,192.80, and the Cboe Small Companies was marginally lower at 16,658.64.
In European equities on Tuesday, the CAC 40 in Paris was down 0.9%, while the DAX 40 in Frankfurt was fell 0.8%.
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.
Beijing has struggled to reignite business activity as officials target around 5% expansion, which analysts say is optimistic given the numerous headwinds, from a prolonged housing crisis to sluggish consumption and local government debt.
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 China, the Shanghai Composite rose 4.6% as traders returned to desks following the Golden Week. The index had raced some 10% higher at the open, before paring gains.
In Hong Kong, the Hang Seng was down 8.4%. Tokyo’s Nikkei 225 ended 1.0% lower, while the S&P/ASX 200 in Sydney fell 0.4%.
‘The latest briefing from the Chinese government offered no new stimulus measures. Copper and iron ore futures are both under pressure, as well, on the growing worry that the positive impact of the stimulus measures could remain short-lived, and that the measures would be insufficient to reverse the property meltdown, deflation and other structural problems – like the ageing population and heavy local government debt burden,’ Swissquote analyst Ipek Ozkardeskaya commented.
China-exposed stocks struggled. China-focused investors JPMorgan China Growth & Income and Baillie Gifford China Growth Trust lost 9.3% and 7.6%.
Miners Antofagasta and Anglo American fell 5.5% and 5.3%, while Asia-focused insurer Prudential shed 5.4%. Save for Vistry’s 33% slide, the trio were the worst FTSE 100 performers.
Vistry Group cut its profit outlook after discovering that cost projections to complete some developments were ‘understated’.
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.
The firm added: ‘We believe the issues are confined to the South Division and changes to the management team in the division are underway. We are commencing an independent review to fully ascertain the causes.’
Imperial Brands added 4.1%, as it announced plans for a chunkier buyback and reshaped dividend.
For the year ended September 30, the Davidoff cigarette and Rizla rolling paper owner said it is on track to have met guidance.
‘At constant currency, we are on track to deliver in line with our full-year guidance with an acceleration in tobacco and NGP net revenue growth versus last year and group adjusted operating profit growth close to the middle of our mid-single digit range,’ Imperial Brands said.
It expects to report results for the year just ended on November 19.
The firm also announced a further £1.25 billion share buyback, which it expects to complete by the October 29 of next year. The sum represents 7% of its share capital and is a 14% rise on the financial 2024 buyback of £1.1 billion.
A reshaped dividend, meanwhile, will mean it will ‘temporarily accelerate’ its cash payout.
Senior slumped 16%, the worst of the 250s. It expects the performance of its Aerospace arm to be weaker in the second-half than the first, on strikes at customer Boeing and supply chain challenges at Airbus.
The engineering firm still expects annual growth in Aerospace, but ‘customer-related headwinds’ mean the second half will be more tepid than the first. While Boeing is looking to pick-up 737 MAX production rates by the end of the year after safety incidents earlier in 2024, an employee strike at its commercial aircraft operations will have an ‘inevitable impact’, Senior warned.
‘In addition, Airbus has publicly been clear about the supply chain challenges it has been facing, particularly on engines and interiors,’ the FTSE 250 listing added.
Senior said it has moved to contain costs. This includes temporary and permanent headcount cuts. It will also look to keep a lid on discretionary spend.
In Flexonics, which serves markets including land vehicles, power and energy, the engineering firm’s ‘view on markets’ has not changed. It still expects the unit’s outturn in the second half to fall short of the first’s.
The pound was quoted at $1.3087 early Tuesday in London, rising slightly from $1.3082 at the time of the European equities close on Monday. The euro firmed to $1.0988 from $1.0978. Against the yen, the dollar was trading at JP¥147.55, down from JP¥148.03.
Brent oil was quoted at $79.34 a barrel, dropping from $80.41. Gold fetched at $2,636.67 an ounce, falling from $2,649.60.
Still to come on Tuesday is a US trade balance reading at 1330 BST. On the corporate front, Pepsi releases third-quarter results before the opening bell in New York.
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