Mining shares, as well some pre-US jobs data nerves, put some pressure on London’s FTSE 100 index on Tuesday afternoon.
London’s large-cap benchmark underperformed peers in Europe, as well as the more-domestically focused FTSE 250. Decent corporate updates, as well as gains for property stocks supported the mid-cap, a stark contrast to the beleaguered FTSE 100 hurt by bearish news related to China.
The FTSE 100 index went into the afternoon down 50.43 points, 0.7%, at 7,462.53. The FTSE 250 was up 43.60 points, 0.2%, at 18,404.85, and the AIM All-Share fell 1.04 points, 0.2%, at 714.20.
The Cboe UK 100 was down 0.6% at 744.81, the Cboe UK 250 was up 0.4% at 15,948.65, and the Cboe Small Companies was up 0.5% at 13,484.50.
In European equities on Tuesday, the CAC 40 in Paris and DAX 40 in Frankfurt each rose 0.2%.
Stocks in New York are called to open lower. The Dow Jones Industrial Average is called down 0.3%, the S&P 500 down 0.4% and the Nasdaq Composite 0.6% lower.
‘The markets are a touch nervous ahead of US jobs figures this week which could either reinforce or undermine the narrative that interest rates have peaked and rate cuts are on the way,’ AJ Bell analyst Russ Mould commented.
Ahead of the US jobs data on Friday, there is a pair of purchasing managers’ index readings at 1445 GMT and 1500 GMT on Tuesday.
Analysts at Lloyds Bank commented: ‘In the US, the ISM services index for November will be new data. That measure has continued to hold above the 50 level despite ongoing concerns about the US economy slipping into recession. However, the October reading was down sharply from September which is consistent with forecasts that GDP growth in Q4 will be much slower than the strong rise seen in Q3. More positively, the alternative US PMI services measure edged up in November and we look for a similar rise in the ISM reading. Also out today will be the October JOLTS report on labour market turnover which will help mould expectations whether US employment conditions are deteriorating ahead of the November labour market report due on Friday.’
The latest S&P Global/Chartered Institute of Procurement & Supply UK services purchasing managers’ index rose to 50.9 points in November, from 49.5 in October. The reading topped the earlier flash estimate of 49.5 points.
The services PMI climbed above the 50.0 mark, which separates growth from decline, to hit the highest level since July. The wider composite PMI reading, calculated using a weighted average of the services and manufacturing data, rose to 50.7 points in November, from 48.7 in October.
In the eurozone, the private sector economy continued to struggle last month, though the pace of declined slowed.
The HBOC eurozone composite PMI reading rose to 47.6 points in November, a four-month-high, from 46.5 in October.
Scope Markets analyst Joshua Mahony commented: ‘A raft of European PMI data further enhanced the notion that we are seeing a soft landing in the eurozone, with improved services sector readings across Italy, France, Germany, and the eurozone as a whole. Nonetheless, with 2.4% inflation now joined by another services sector contraction, markets are increasingly confident (75% chance) that we will see a March rate cut from the ECB. Incredibly, we are seeing markets price 150 basis points worth of rate cuts from March onward, which represents a potential six cuts in the final seven meetings of 2024. Whether this is realistic will likely become a key topic moving forward, with market volatility expected if central bankers feel the need to reign in those somewhat extended expectations.’
The pound was quoted at $1.2619 early Tuesday afternoon in London, flat from $1.2620 late Monday. The euro was largely unmoved at $1.0816 from $1.0817. Versus the yen, the dollar edged up to at JP¥147.08, from JP¥147.02.
Ratings agency Moody’s downgraded the outlook on China’s credit rating to ‘negative’ from ‘stable’ on the back of rising debt in the world’s second-largest economy, with Beijing saying it was ‘disappointed’ by the move.
The change ‘reflects rising evidence that financial support will be provided by the government and wider public sector to financially stressed regional and local governments and state-owned enterprises’, the US agency said in a note.
This, it said, was ‘posing broad downside risks to China’s fiscal, economic and institutional strength’.
China’s recovery has been hampered by weak consumer and business confidence, the persistent housing crisis, record youth unemployment and a global slowdown which is weighing on demand for Chinese goods.
Shares in London listings exposed to the Chinese economy fell in the wake of the Moody’s assessment. Miner Anglo American lost 2.8%, Asia-focused insurer Prudential gave back 2.2% and luxury goods firm Burberry fell 0.2%.
Property stocks in London were on the rise. Land Securities added 0.4%, among the best large-cap performers, while in the FTSE 250 index, British Land rose 2.0%, Derwent climbed 2.2% and LondonMetric shares increased 1.7%.
Goldman Sachs said the outlook for real estate is ‘positive’. It lifted Landsec to ’buy’ from ’neutral’ and British Land to ’neutral’ from ’sell’.
Also helping to support the FTSE 250, discoverIE surged 17%. The customised electronics manufacturer and designer said pretax profit grew 8.1% in the half-year ended September 30 to £16.0 million from £14.8 million the year before.
Revenue fell slightly to £222.0 million from £222.6 million a year prior. discoverIE attributed this to a one-off increase in semiconductor costs of £2.9 million, which reduced overall sales growth by 1%.
discoverIE upped its interim dividend by 5.6% to 3.75 pence per share from 3.55p in the first half of financial 2023.
Looking ahead, discoverIE expects to deliver full-year underlying earnings in line with its forecasts.
Elsewhere in London, On The Beach shares jumped 18% as the package holiday firm reported improved half-year earnings and plotted a resumption of dividends.
In the year to September 30, revenue increased 19% to £170.2 million, from £143.4 million. Its pretax profit jumped to £12.9 million from £2.2 million. It did not recommend a final dividend for financial 2023. However, it does intend to reintroduce a dividend for the next financial year, based on a return to ‘normal market conditions’ and a ‘sustainable cash generative business model’.
‘Holidays have proved resilient during the cost-of-living crisis as people are prepared to give up some of their normal day-to-day treats if it means still being able to go abroad for a week by the sea. Airlines have been talking about strong demand for some time and On The Beach’s latest results certainly suggest a favourable backdrop for the travel industry,’ AJ Bell’s Mould commented.
The London Stock Exchange saw trading halted on hundreds of stocks on Tuesday after another outage on the stock market.
In morning trading, it said it was only able to trade FTSE 100, FTSE 250 and International Order Book stocks following an ‘incident’. IOB stocks include the likes of Samsung Electronics, and carmaker Hyundai.
The exchange said it was investigating the issue impacting its trading and information system.
The incident meant trading for hundreds of London-listed firms, such as Deliveroo and Asos, was halted for investors and traders.
Trading in these stocks stopped at about 9.15am. Shortly after 10am, London Stock Exchange Group said in a notice that trading across all its markets had resumed.
Brent oil was quoted at $77.90 a barrel early Tuesday afternoon, down from $78.53 late Monday. Gold was priced at $2,023.93 an ounce, down from $2,025.87.
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