A fresh jump in Covid cases in China set the mood at the start of the week, with the FTSE 100’s sizeable mining sector dragging on London’s blue-chip index.
Also hammering the mood were fears over Russia’s energy supply to Europe. Gas supplies from Russia to Germany are being halted for 10 days for scheduled maintenance work on the Nord Stream 1 Baltic Sea pipeline, the most important connection for natural gas flows to Germany.
However, officials are highly concerned that the supply might not be reinstated, as Russia’s war continues against Ukraine.
The FTSE 100 index was down 29.12 points, or 0.4%, at 7,167.12. The FTSE 250 index was down 40.10 points, or 0.2%, at 18,871.51. The AIM All-Share index was down 1.35 point, or 0.1%, at 885.39.
The Cboe UK 100 index was down 0.6% at 713.96. The Cboe 250 was down 0.2% at 16,440.62 and the Cboe Small Companies was flat at 13,227.05.
In mainland Europe, the CAC 40 stock index in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.8%.
‘Global markets slid lower everywhere at the start of the new week, as appetite for riskier assets decreased and lingering dark clouds continue to overshadow market sentiment. While monetary tightening, inflation and the prospect of slower growth have been dampening the markets of late, today’s risk aversion came from China,’ said ActivTrades analyst Pierre Veyret.
Shanghai recorded more than 120 virus cases at the weekend, having seen its first case of the highly contagious BA.5 Omicron strain, forcing officials to launch another mass testing drive.
With China fixated on its zero-Covid strategy of wiping out the disease, there is increasing concern that authorities will revert to another painful lockdown, with Shanghai residents having only emerged from a two-month confinement in June.
There have also been new infections uncovered in other parts of the country, including Beijing.
In the FTSE 100, miners were among the worst performers amid China lockdown fears. Antofagasta was down 3.6%, Anglo American down 4.0%, Endeavour Mining down 3.0% and Glencore down 2.5%.
Dechra Pharmaceuticals was down 1.5%. The veterinary products firm reported annual revenue progress, though it cautioned that growth rates are normalising as pandemic tailwinds ease.
For the year ended June 30, revenue increased by 14% at constant exchange rates and 12% at actual exchange rates. In financial 2021, revenue grew 20% at constant currency and 18% on a reported basis to £608.0 million.
Chief Executive Officer Ian Page said: ‘We are delighted that the financial year just ended was another record year for Dechra and in line with expectations, with group revenue growth slowing to more normal levels as expected in the second half as the impact of the pandemic on our markets unwinds. Whilst we expect current macroeconomic uncertainties to continue, the veterinary pharmaceutical market remains resilient and in growth.’
In the FTSE 250, Wizz Air was down 3.5% after the Hungarian airline said it expects a ‘material’ profit in the second quarter, but cautioned it will trim flight utilisation over the summer to cope with recent travel chaos.
For the first quarter to June 30, Wizz Air said it registered a €285 million operating loss and net loss of €450 million, but expects a ‘material’ operational profit in the second quarter on strong summer demand.
Wizz’s update came as London’s Heathrow Airport warned it will ask airlines to cancel more flights this summer if it does not believe previous schedule reductions will sufficiently reduce disruption.
Rival airline operators Tui and easyJet were down 1.2% and 1.7% respectively in a negative read-across.
On AIM, Joules Group was down 20% after the British lifestyle brand confirmed it is in talks with KPMG International to shore up its balance sheet, as the retailer grapples with a cost of living crisis and inflationary pressures.
Joules said it focusing on ‘improving profitability, cash generation and liquidity headroom’ and has called on KPMG to assist with the process.
The company was responding to a Sunday Times report which stated that KPMG’s debt advisory arm is exploring options to solidify the retailer’s cash position. Options being mulled include a capital raise, the Sunday Times reported.
The Sunday Times added the Leicestershire, England-based firm is moving away from unprofitable deals and Chinese suppliers to mitigate supply chain disruptions.
The pound was quoted at $1.1948 at midday on Monday, down from $1.2040 at the London equities close Friday.
The euro was priced at $1.0105, down from $1.0185 late Friday.
The yen was trading at 24-year lows against the dollar. Against the yen, the dollar was quoted at JP¥137.05, higher against JP¥135.88 late Friday. The greenback touched JP¥137.28 overnight.
Brent oil was trading at $105.25 a barrel on Monday at midday, down from $106.00 late Friday. Gold stood at $1,736.21 an ounce, lower against $1,744.88.
US equities are called lower on Monday. The Dow Jones Industrial Average is called down 0.4%, the S&P 500 down 0.5% and Nasdaq Composite 0.8% lower.
Twitter shares were down 7.0% in pre-market trade after Elon Musk on Friday pulled the plug on his $44 billion deal to buy the social media platform.
The world’s richest man accused the social media firm of ‘misleading’ statements about the number of fake accounts, a regulatory filing showed. Musk’s effort to terminate the deal that he inked in April sets the stage for an epic court battle over a billion-dollar breakup fee and more.
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