Stocks in Europe opened in a tepid fashion on Wednesday, tracking Asian equities lower as data out of China disappointed.
Tensions between the US and China are also in focus, in light of the latter slapping restrictions on rare metal exports.
Across the Atlantic, traders will return to desks following the Independence Day holiday. Focus will turn to the Federal Reserve when minutes of its latest meeting are released later.
The FTSE 100 index opened down 28.10 points, 0.4%, at 7,491.62. The FTSE 250 was down 74.78 points, 0.4%, at 18,459.01, and the AIM All-Share was down 1.34 points, 0.2%, at 755.10.
The Cboe UK 100 was down 0.4% at 747.06, the Cboe UK 250 was down 0.4% at 16,174.71, and the Cboe Small Companies was up 0.1% at 13,706.02.
In European equities on Wednesday, the CAC 40 in Paris and the DAX 40 in Frankfurt were down 0.4%.
Financial markets in the US were closed on Tuesday for Independence Day.
In China, the Shanghai Composite closed down 0.7%, while the Hang Seng index in Hong Kong was down 1.5%. The S&P/ASX 200 in Sydney closed down 0.4%.
Sentiment in Asia was hurt by the latest PMI data, which suggested China’s economic recovery was weakening.
The Caixin services purchasing managers’ index eased to 53.9 points in June from 57.1 in May. Falling closer to the 50-point no-change mark, it shows growth slowed in the sector.
Fears of slowing growth and recessions kept a lid on oil prices. Brent oil was trading at $75.77 a barrel early Wednesday, down from $76.13 at the time of the European equities close on Tuesday.
Investors will also be keeping a close eye on developments between the US and China, ahead of US Treasury Secretary Janet Yellen’s visit to Beijing on Thursday.
The meeting comes after a tense few weeks, with a series of ‘tit-for-tat’ trading curbs being announced by both countries. On Monday, China announced restrictions on rare metal exports, which are used in critical applications such as semiconductors.
The Nikkei 225 index in Tokyo closed down 0.3%, with Japanese economic data also conforming to the trend of a growth slowdown.
The au Jibun Bank services PMI fell to 54.0 points in June, from a series record of 55.9 in May - signalling a solid, but slower, expansion in activity.
There will be the minutes from the latest Federal Open Market Committee meeting at 1900 BST.
The Federal Reserve had voted to keep interest rates unchanged at its June meeting, but stressed further hikes were still very much a possibility. According to CME’s FedWatch tool, the market is pricing in an 89% chance of a 25 basis point hike at its meeting on July 26.
‘It remains unclear why the Fed did pause and so the detail of the discussion may be informative on this. Markets will also be watching for any indication of what precisely policymakers will be looking for when deciding on whether a July rate hike is indeed necessary,’ said analysts at Lloyds Bank.
The dollar was stronger in early exchanges in Europe ahead of the minutes.
Sterling was quoted at $1.2704 early Wednesday, lower than $1.2728 at the London equities close on Tuesday. The euro traded at $1.0885, lower than $1.0900. Against the yen, the dollar was quoted at JP¥144.66, up versus JP¥144.46.
Gold was quoted at $1,921.64 an ounce early Wednesday, lower than $1,927.60 on Tuesday
In the FTSE 100, Legal & General fell 2.4%, despite citing ‘confidence’ in achieving its five-year ambitions are unchanged.
The financial services and asset management company said a transition to a new accounting method will not hurt its ‘strategy, solvency or dividends’. The IFRS 17 accounting standard for insurers was ushered in at the start of 2023.
‘It only impacts the reporting of our annuity and protection businesses, changing the timing of recognition of earnings from these products but not the quantum,’ Legal & General said. It said it is on track to generate £8 billion to £9 billion of capital for the period between 2020 to 2024. L&G said it has transacted £6.8 billion worth of pension risk transfer transactions year-to-date.
Among the midcaps, Keller Group jumped 6.5%
The geotechnical engineering firm said it expects its full-year underlying operating profit to be ‘materially ahead’ of market expectations, though the increase in earnings will be moderated by the latest interest rate hikes.
‘Trading in the first half has remained strong and we anticipate a record performance in the period,’ it said.
Due to the timing and phasing of certain contracts, it expects profit to be more evenly weighted between the first and second half.
Operational improvements in its North American foundations business have helped to recover operating margins, and Suncoast is expected to deliver an improved performance despite lower production volumes. Keller did note challenges from the ‘recessionary backdrop’ in Europe, however, which is causing margin erosion and delays to some projects.
On AIM, Supreme rose 10% as it reported a year of robust trading in the 12 months to March 31, and raised its expectations for the current year.
The Manchester-based firm that manufactures and distributes battery, lighting and vaping products said revenue rose 19% year-on-year to £155.6 million from £130.8 million, though pretax profit fell 11% to £14.4 million from £16.3 million.
Supreme also announced a ‘significant’ vaping distribution agreement. It has been selected as the master distributor for the UK vape brands, ElfBar and Lost Mary. Supreme expects the deal to generate between £25 and £30 million in revenue in financial 2024.
The company now expects trading in the year to be ‘significantly ahead’ of market consensus of £159 million in revenue, and adjusted Ebitda of £22.6 million.
Still to come on Wednesday’s economic calendar, there’s a slew of services PMI prints, with the UK at 0930 BST.
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