European equities went into Tuesday afternoon on the decline, with hawkish commentary from US monetary policymakers and more unimpressive data from China hurting investor enthusiasm.
After less-than-stellar trade data from China, focus turns to an inflation reading which similarly has the potential to strengthen the case for economic stimulus.
A US inflation reading on Thursday will also be scrutinised, meanwhile. Stock market investors will be hoping the rate of inflation fades closer to the 2% Fed target.
The FTSE 100 index was down 45.62 points, 0.6%, at 7,508.87.
‘The Chinese economy continues to splutter and that’s bad news for a FTSE 100 chock-full of companies which are closely tied to its fortunes,’ said AJ Bell investment director Russ Mould.
The FTSE 250 was up 1.78 points at 18,863.45, and the AIM All-Share was down 0.93 points, 0.1%, at 758.70.
The Cboe UK 100 was down 0.6% at 748.78, the Cboe UK 250 was down 0.2% at 16,520.20, and the Cboe Small Companies was down 0.8% at 13,631.33.
The Chinese economy has struggled to bounce back since January 2020, when it first felt the effects of the Covid-19 pandemic.
Figures showed that China last month suffered its biggest drop in exports for more than two years.
Sales of Chinese products to foreign markets plunged 14.5% on-year in July, a third consecutive drop, according to the customs authority. The decline was bigger than expected and the heaviest drop since the start of 2020, when the economy came to a standstill in the early weeks of the Covid-19 pandemic.
‘China has been trying to move to being an economy driven by domestic consumption but the level of support provided to households during Covid and the country’s particularly stringent and long-lasting Covid restrictions didn’t match up to those seen in the West,’ said AJ Bell’s Mould.
Asia-focused bank Standard Chartered was down 1.6% on Tuesday midday. Insurer Prudential, which is also Asia-focused, shed 0.8%.
Meanwhile, miners Anglo American and Antofagasta were down 2.2% and 1.9%, respectively.
Glencore lost 4.0%. On Tuesday, Glencore also reported underwhelming first-half results, as the mining company grapples with falling coal prices and a less-than-supportive economic environment in China.
Investors also had US interest rate worries to contend with. Federal Reserve governor Michelle Bowman warned at the weekend that more interest rate hikes ‘will likely be needed’ to fight inflation. On Monday, New York Fed President John Williams also did not rule out further monetary policy tightening.
Stocks in New York were called to open lower. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite were all called to open down 0.4%.
The pound was quoted at $1.2723 at midday on Tuesday in London, lower compared to $1.2776 at the equities close on Monday. The euro stood at $1.0964, lower against $1.1004. Against the yen, the dollar was trading at JP¥143.05, higher compared to JP¥142.25.
Back in London, abrdn lost 9.1%.
abrdn reported its assets under management shrunk in the first half of the year, with outflows continuing as it grappled with turbulent market conditions. The company noted ‘challenging market conditions and net outflows from the ’risk-off’ environment’.
It extended its share buyback, however, and said it has the ‘key management resources on board’ to ensure a promising future.
In the FTSE 250 index, TI Fluid Systems jumped 17%.
TI Fluid Systems is an Oxfordshire-based maker of automotive fluid storage, carrying, delivery, and thermal management systems for light vehicles.
For the six months to June 30, the company reported a pretax profit of €58.9 million, leaping from €19.8 million a year prior. Revenue climbed 13% to €1.77 billion from €1.56 billion.
TI Fluid declared a dividend of 2.30 euro cents per share, more than doubled from 1.00 cents a year prior.
Quilter rose by 13%.
As at June 30, assets under management and administration were £101.7 billion, up 2% from £99.6 billion at December 31, principally due to positive market movements of £1.9 billion.
This growth, it said, reflected effective cost management in an inflationary environment, as well as higher investment revenue resulting from interest income earned on cash and capital resources.
On AIM, MyHealthChecked plummeted 26%.
The consumer home-testing healthcare company said it expects revenue to drop in its half year, as the demand for Covid-19 tests falls.
MyHealthChecked said that it expects revenue to fall in by 74% in the six months ended June 30 to £2.5 million, from £9.8 million.
Chief Executive Officer Penny McCormick said: ‘Despite the inevitable and anticipated fall in demand for Covid-19 testing, MyHealthChecked remains well-positioned to deliver its plan in 2023 given the distribution relationship we have established with Boots and their nationwide launch of our expanded portfolio of at-home wellness tests.’
In European equities on Tuesday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.9%.
Germany’s annual inflation rate cooled to 6.2% in July from 6.4% in June, Destatis said. The figure confirmed an earlier estimate. Month-on-month, consumer price grew 0.5% in July, picking up speed from a 0.3% rise in June from May.
On a harmonised basis, designed for EU-wide comparison, Germany’s annual inflation rate eased to 6.5% in July, from 6.8% in June. Consumer prices also rose 0.5% on-month by the harmonised measure in July, accelerating from a 0.4% rise recorded in June.
Brent oil was quoted at $83.77 a barrel at midday in London on Tuesday, down from $85.44 late Monday. Gold was quoted at $1,933.98 an ounce, down slightly against $1,934.11.
Still to come on Tuesday’s economic calendar, there are US wholesale trade sales at 1500 BST. There is also the US IBD/TIPP economic optimism index at the same time.
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