London share prices reversed direction again on Tuesday, falling from the outset of trading after a sell-off in Hong Kong and Shanghai as the Covid-19 pandemic re-emerged with a vengeance in China.
The return of the pandemic to front-of-mind for UK investors comes as the war in Ukraine continues to rage and the US central bank prepares to raise interest rates.
‘Investors anticipate a quarter basis point rate hike during tomorrow’s meeting while six further increases are widely expected for the rest of 2022. This is in line with expectations of a much less accommodative Federal Reserve which is about to bring two years of extremely dovish policies to an end. Investors are now torn between increasing geopolitical tensions and key monetary decisions with one crucial question in mind: how will global growth be impacted?’ said Pierre Veyret, technical analyst at ActivTrades.
The FTSE 100 index was down 64.75 points, or 0.9%, at 7,128.72 on Tuesday at midday. The mid-cap FTSE 250 index was down 239.20 points, or 1.2%, at 20,232.05. The AIM All-Share index was down 11.25 points, or 1.1%, at 988.66.
The Cboe UK 100 index was down 0.9% at 709.33. The Cboe 250 was down 1.1% at 17,877.24, and the Cboe Small Companies down 0.8% at 14,432.66.
In mainland Europe, the CAC 40 stock index in Paris and the DAX 40 in Frankfurt were both down 1.0% on Tuesday.
European markets were following on from a brutal session in China, where the SSE Composite Index in Shanghai fell 5.0% and the Hang Seng index in Hong Kong tumbled 5.7%.
China reported 5,280 new Covid-19 cases on Tuesday, more than double the previous day’s tally, as the highly transmissible Omicron variant spreads across a country that has tethered tightly to a ‘zero-Covid’ strategy.
Shenzhen - the southern tech and market hub of 17.5 million people - is three days into a lockdown with many factories closed and supermarket shelves emptying, while China's largest city Shanghai is under a lattice of restrictions that fall short of a citywide shutdown.
In London, miners were lower amid worries that lockdowns in the world's second largest economy could dent industrial demand. Glencore fell 4.0%, Rio Tinto was down 3.8% and Antofagasta declined 2.7%.
Prudential, a life insurer focused on Asia and Africa, was down 4.2% in midday trade, while emerging markets-focused lender Standard Chartered was down 4.5%. Both stocks also are listed in Hong Kong.
Traders additionally were monitoring China’s response to Russia’s invasion of Ukraine, wary of Western sanctions. Beijing has not openly condemned Moscow’s acts in Ukraine, and US media reported that Russia had asked China for military and economic assistance, as its troops struggle to make ground and its economy faces devastation from Western sanctions.
‘China is not a party to the crisis, still less wants to be affected by the sanctions,’ Foreign Minister Wang Yi said, according to a readout of a phone call with his Spanish counterpart Jose Manuel Albares published on Tuesday.
Despite geopolitical turmoil, Wall Street was on track for a higher start. The Dow Jones was called up 0.2%, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.5%.
Tuesday’s economic calendar has US producer prices at 1230 GMT.
As traders gear up for a likely US interest rate rise on Wednesday, the dollar was trading firm.
The euro traded at $1.0986 on Tuesday, soft against $1.0991 late Monday. Against the yen, the dollar firmed to JP¥118.02 from JP¥117.98.
Sterling was quoted at $1.3056, only a touch lower than $1.3059 at the London equities close on Monday, after data showed the UK labour market continued to recover at the start of 2022.
The unemployment rate in the three months to January was 3.9%, down from 4.1% in the three months to December and returning to pre-pandemic levels.
Back on the London Stock Exchange, oil majors also were weighing on the FTSE 100, with BP and Shell both down 2.1%. Brent oil fell back below $100 a barrel for the first time since March 1, trading at $98.69 at midday against $105.30 late Monday.
The gold price similarly was giving back war gains, sending shares in Fresnillo down 4.8%. Gold was quoted at $1,924.00 an ounce, lower than $1,957.83 on Monday.
In the green was Informa, up 2.3%. The business information publisher and events organiser swung back to profit in 2021, with the firm confident over the year ahead as Covid restrictions are relaxed.
Revenue for 2021 rose to £1.80 billion from $1.66 billion the year before, with the firm swinging to a pretax profit of £137.1 million from a staggering loss of £1.14 billion in 2020.
In the FTSE 250, Redde Northgate rose 9.0% after saying it expects to beat consensus expectations for annual profit, due to a stronger-than-expected performance driven by rental demand and robust used vehicle market values.
Due to having substantial headroom under its facilities, the commercial vehicle hire firm will launch a share buyback programme for up to £30 million, starting with immediate effect and is set to be completed by September 15.
TP ICAP fell 12% after the interdealer broker reported a plunge in profit in 2021, despite a slight rise in revenue, blaming ‘unusually quiet secondary markets’, particularly in the first half of last year.
TP ICAP reported £24 million in pretax profit, down from £129 million in 2020, though revenue rose by 4.0% to £1.87 billion from £1.79 billion. Despite the fall in profit, the company boosted its annual dividend by more than 50% to 9.5 pence per share from 6.0p.
Amigo rose 4.8% after the guarantor loans provider said the high court has granted an order allowing its schemes of arrangement to proceed to a creditor vote. ‘The road ahead is not easy, but we are on the right track and today’s court decision is another step forward,’ said Chief Executive Gary Jennison.
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