8th Oct 2024 17:11
(Alliance News) - London's FTSE 100 nursed heavy losses on Tuesday, as the stimulus-driven rally in China ran out of puff, hitting miners and financial stocks exposed to the region.
The FTSE 100 index closed down 113.01 points, 1.4%, to 8,190.61. The FTSE 250 ended down 222.01 points, 1.1%, at 20,631.20, and the AIM All-Share closed down 3.54 points, 0.5%, at 735.07.
The Cboe UK 100 fell 1.3% to 820.18, the Cboe UK 250 closed down 1.0% at 18,108.31, and the Cboe Small Companies eased 0.2% at 16,634.72.
In Europe, the CAC 40 in Paris closed down 0.7%, while the DAX 40 in Frankfurt ended down 0.2%.
China said on Tuesday it was "fully confident" of hitting its growth target this year but held off announcing more stimulus measures, leaving markets disappointed.
All eyes were on a news conference led by Zheng Shanjie, head of China's National Development & Reform Commission, on Tuesday, and investors hoped Beijing would unveil more economy-boosting policies.
But Zheng and colleagues refrained from laying out any new stimulus, instead reiterating that "the fundamentals of our country's economic development have not changed".
Ipek Ozkardeskaya at Swissquote Bank said there is a "growing worry" that the positive impact of the stimulus measures could remain short-lived, and that the measures would be insufficient to reverse the property meltdown, deflation and other structural problems.
In London, miners suffered on concerns over falling demand China, a major consumer of metals.
Anglo American fell 6.7%, Antofagasta dipped 5.0%, Rio Tinto ebbed 4.8% and Glencore declined 4.6%.
Asia-focused insurer Prudential fell 4.5% while HSBC slipped 4.2%.
Also weighing on London, Brent oil was quoted at USD77.20 a barrel in London on Tuesday, down from USD80.41 late Monday.
The slump in the oil price after recent strength dragged BP down 3.7%, while Shell slid 2.2%.
Spirits firms were also on the back foot in Europe after China imposed anti-dumping measures on brandy imported from the EU.
Diageo fell 1.7%, while Remy Cointreau fell 6.4% and Pernod Ricard fell 4.2% in Paris.
Russ Mould at AJ Bell said: "Importers of brandy coming to China from the EU will now have to put down security deposits of up to 39% of the import value, with it unclear as to when the deposits will be returned. That could push up the price of such products for drinkers, and potentially lead to reduced sales of EU-originated brandy if the consumer seeks cheaper alternatives."
Elsewhere in the FTSE 100, housebuilder Vistry plunged 24% after slashing profit guidance.
The company said it recently became aware that in its South division, which serves areas such as Kent and the Thames Valley, the total full-life cost projections to complete 9 out of its 46 developments were understated by around 10% of the total build costs. Some of these developments included "large-scale schemes".
"To add further context to the 9 developments in question, it is important to note that the group as a whole has around 300 developments," Vistry added.
The revised cost outlook cuts expectations for 2024 adjusted pretax profit by GBP80 million. Assumptions for 2025 and 2026 have been cut by GBP30 million and GBP5 million. For 2024, it now expects adjusted pretax profit of GBP350 million, a 16% decline from GBP419.1 million in 2023.
"This is a big cut, and we expect the price of the shares to fall significantly today. Investors will be looking to understand how the issue arose, how it is being dealt with and why and how Vistry is confident that the issue is confined to one division," analysts at RBC Capital Markets said.
Analysts think the firm now faces the task of rebuilding confidence and reassuring the market that this is a one-off problem.
Davy Research said: "The extent to which the group can reassure investors that this is an issue isolated within these sites from one single division will be a significant driver of the stock in the aftermath of this trading update."
Imperial Brands fared better, with shares rising 4.1% after reporting trading is in line with expectations as it ramped up plans for returns to shareholders.
The Davidoff cigarette and Rizla rolling paper owner said it intends to return around GBP2.8 billion to shareholders in the financial year to September 30, 2025, compared with GBP2.4 billion in the financial year just ended.
This will comprise a share buyback of GBP1.25 billion, up 14% on-year from GBP1.1 billion, and cash dividends of around GBP1.5 billion.
Imperial Brands intends to "reprofile" the ordinary dividend for the new year.
"This will result in two quarterly dividends of 54.26 pence per share to be paid in December 2024 and March 2025," it said.
Simon Hales at Citi said the update was "reassuring", with the buyback slightly bigger than the around GBP1.2 billion investors expected and likely to be "well-received".
"Moreover, a planned change to quarterly dividends will mean a bigger end of 2024 payout for investors."
The mood was brighter in New York where markets rallied after heavy losses on Monday.
At the time on London's close, the Dow Jones Industrial Average was up 0.2%, the S&P 500 was 0.8% higher, while the Nasdaq Composite rose 1.2%.
Swissquote's Ozkardeskaya thinks one thing that will help traders decide what direction to take is the US CPI, due to be released on Thursday.
"If soft enough, Thursday’s CPI update could eventually help calming the Fed doves nerves and prevent the US dollar from stepping into the medium-term bullish consolidation zone against many majors. If not, the no November cut pricing could take off, and that would mean higher yields, a stronger US dollar across the board, weaker other currencies, and some negative pressure on equity valuations," she thinks.
The pound was quoted at USD1.3084 late on Tuesday afternoon in London, up slightly from USD1.3082 at the equities close on Monday.
The euro eased to USD1.0963, down against USD1.0978. Against the yen, the dollar was trading at JPY148.32, up compared to JPY148.03.
Elsewhere, retailers Marks & Spencer rose 1.1%, Tesco climbed 0.2% and Next advanced 0.8% after a upbeat retail sales report.
UK retail sales picked up in September as the start of the school year saw a boost for children's clothing, footwear and accessories while food sales growth remained healthy, a survey showed.
According to the BRC-KPMG retail sales monitor, retail sales increased by 2.0% year-on-year in the five weeks to September 28, against a growth of 2.7% a year prior. This was above the 3-month average growth of 1.2% and the 12-month average growth of 1.1%.
Meanwhile, Senior fell 13% as it warned that the strike at Boeing Co, plus other short-term issues, will hurt its own trading.
The Rickmansworth, England-based engineering firm said the strike at US airline manufacturer Boeing, which is now in its fourth week, will have an "inevitable impact on our operating businesses most exposed to this customer, both directly and through its Tier 1 suppliers."
As a result, Senior expects Aerospace second half performance to be lower than the first half. It still expects on-year growth in the division, however.
In Flexonics, full-year expectations are broadly unchanged, with first half performance higher than the second.
But Greencore rose 8.8% after saying full-year profit will be ahead of market expectations after broad-based growth.
The Dublin-based food processing firm said profit conversion in the fourth quarter ended September was ahead of expectations.
As a result, Greencore anticipates full-year adjusted operating profit to be "ahead of current market expectations," and in a range of GBP95 to GBP97 million. This was raised from GBP90.5 to GBP92.5 million, analysts at Shore Capital noted.
Gold was quoted at USD2,608.13 an ounce late Tuesday, down against USD2,649.60 late
Monday.
Wednesday's economic calendar sees the minutes of the last Federal Open Market Committee meeting.
By Jeremy Cutler, Alliance News reporter
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