Equities investors returned from the Easter holiday in a glum mood, with the continued war in Ukraine and Covid-19 lockdowns in China expected to hobble global economic growth.
Meanwhile, US earnings season continues this week. With the big banks done reporting, it is the turn of big tech.
The large-cap FTSE 100 index was down 27.76 points, or 0.4%, at 7,588.62 midday Tuesday. The mid-cap FTSE 250 index was down 183.17 points, or 0.9%, at 20,938.44. The AIM All-Share index was down 6.75 points, or 0.6%, at 1,053.41.
The Cboe UK 100 index was down 0.3% at 755.64. The Cboe 250 was down 0.8% at 18,419.24, and the Cboe Small Companies down 0.3% at 15,391.63.
Investors are bracing ahead of the International Monetary Fund's latest world economic outlook to be released at 1300 GMT on Tuesday. IMF director Kristalina Georgieva has already warned that the news is likely to be downbeat.
The Russian invasion of Ukraine, which has resulted in disruption of exports from both commodity-rich countries, coupled with the Western sanctions piled on Russia in response, both play a role in the expected slowdown.
But the world had already been facing economic headwinds before the invasion, in the form of rising inflation rates, tougher conditions on global financial markets and the far-reaching effects of China's current tough pandemic lockdowns.
Already in January, the IMF had lowered its global economic forecast for 2022 by half a percentage point, to 4.4%.
Compounding worries over global growth, data on Monday showed China's economy grew by a better-than-expected 4.8% in the first quarter of 2022, but the government warned of ‘significant challenges’ ahead while massive Covid-19 lockdowns started to bite.
The figure also was short of Beijing's annual growth target of around 5.5%.
Industrial production growth eased to 5.0% in March, NBS data showed, down from the January-February period. Meanwhile, retail sales sank 3.5% and the urban unemployment rate ticked up to a 22-month high of 5.8% last month.
In mainland Europe, the CAC 40 in Paris was down 1.0%, while the DAX 40 in Frankfurt was down 0.9% on Tuesday.
Wall Street is on course for a lower start, with focus on Netflix earnings after the bell. The Dow Jones was pointed down 0.2%, the S&P 500 down 0.3%, and the Nasdaq Composite down 0.5%. All three US stock indices closed slightly lower on Monday.
Already out Tuesday, Johnson & Johnson reported a drop in first quarter earnings, despite sales growth of 5%.
The New Jersey-based pharmaceutical company said first quarter earnings fell 17% to $5.15 billion from $6.20 billion a year before. Per share, earnings drop to $1.93 from $2.32, also representing a 17% fall on the previous year.
Sales rose 5% to $23.43 billion from $22.32 billion. In Consumer Health, sales declined 1.5%, but in Pharmaceuticals, sales grew 6.3%.
The dollar was on the front foot amid Tuesday's risk-off mood. The pound was quoted at $1.3016, falling from $1.3060 Thursday and having slipped below $1.30 earlier Tuesday. The euro was priced at $1.0791 on Tuesday, down slightly from $1.0797 late Thursday.
Against the yen, the dollar was trading at JP¥128.32, up from JP¥125.91, as the Japanese unit hit fresh 20-year lows.
‘One might therefore think that the authorities wouldn't mind an even weaker yen, but nowadays they are starting to get concerned about the politics of inflation and record-high increases in the price of imported raw materials, particularly energy,’ said Marshall Gittler, head of research at BDSwiss.
Safe-haven asset gold stood at $1,975.80 an ounce at midday in London, up from $1,964.54 late Thursday.
On the London Stock Exchange, ITV shares fell 2.8% after Berenberg downgraded the broadcaster to 'sell' from 'hold'.
Cushioning the FTSE 100 were oil majors, with Shell shares up 1.6% and BP up 1.0%. Brent oil was quoted at $112.50 a barrel, up from $107.52.
In the FTSE 250, Spectris was up 5.9% after unveiling a £300 million share buyback programme alongside the sale of its Omega Engineering subsidiary to Arcline Investment Management.
Precision instrumentation and controls supplier Spectris will net $525 million from the Omega disposal. Specialist sensors provider Omega generated sales of £129.0 million in 2021 and adjusted earnings before interest, tax, depreciation and amortisation of £19.7 million.
The buyback will consist of an initial £150 million, ‘to be launched shortly’, before a further £150 million tranche. The second instalment is subject to shareholder approval at the firm's annual general meeting on May 27.
JTC fell 6.2% despite hiking its dividend after revenue and profit growth in 2021, with acquisitions helping to boost the fund manager's performance.
Revenue for 2021 grew 28% to £147.5 million from £115.1 million in 2020, and pretax profit jumped to £27.8 million from £11.2 million. Annualised new business wins totalled £20.9 million, up from £17.9 million in 2020.
The revenue growth reflected strong net organic growth of 9.6% plus inorganic growth of 19%, the firm said. JTC has been pleased with the integration and business performance of recent acquisitions, with all seven ‘on track’, it said.
SSP was down 5.5% after Deutsche Bank cut the food and beverage concessions operator to 'hold' from 'buy'.
‘Although the catering sector (concession as well as contract catering) is still in recovery from the Covid-19 crisis, the global economy is now facing macroeconomic risks due to the war in Ukraine, strong inflation (especially in energy, food costs, and wages), and resultant expectations of interest rate increases over quicker time frames in the next few months,’ commented Deutsche Bank.
On AIM, Cake Box shares climbed 11% after the maker of egg-free cakes said it brought in record revenue in its most recent financial year, helped by a strong second half. Cake Box expects revenue to rise around 50% in its year that ended March 31, with adjusted pretax profit to come in line with market expectations.
By Lucy Heming; lucyheming@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
