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LONDON MARKET CLOSE: Stocks and sterling slides amid China worries

5th Sep 2023 17:00

(Alliance News) - Stock prices in London ended worse on Tuesday as lower-than-expected growth for the Chinese service sector reignited worries about the health of the world's second-largest economy.

The FTSE 100 index closed down 14.83 points, 0.2%, at 7,437.93. The FTSE 250 ended down 32.72 points, 0.2%, at 18,491.42, and the AIM All-Share closed down 0.54 of a point, or 0.1%, at 740.05.

The Cboe UK 100 ended down 0.2% at 740.46, the Cboe UK 250 closed down 0.2% at 16,145.65, and the Cboe Small Companies ended down 0.2% at 12,960.93.

Growth in China's services sector slowed in August, according to survey data on Tuesday, with companies reporting less export demand.

The Caixin services purchasing managers' index fell to 51.8 points in August from 54.1 in July. Slipping closer towards the 50-point no-change mark, it signals a more modest expansion in activity.

The composite PMI, which measures the manufacturing and services sector, fell to 51.7 points in August from 51.9 in July.

Pierre Veyret, technical analyst at ActivTrades, said the poor PMI data from China highlighted just how "fragile" the second-biggest economy in the world remains and has "seriously dent[ed]" hopes of a recovery in the region.

Veyret's colleague, Ricardo Evangelista, said, against this backdrop, fears will now grow that China's problems may have a "domino effect" over the rest of the global economy. Evangelista added that this should mean there will be "no lack of demand" for the safe-haven US dollar, however.

The pound was quoted at USD1.2564 at the London equities close on Tuesday, down from USD1.2620 at the close on Monday. The euro stood at USD1.0713, lower against USD1.0791. Against the yen, the dollar was trading at JPY147.66, higher compared to JPY146.46 late Monday.

In London, BP was the top blue-chip performer at the close on Tuesday, rising 2.0% on the news that Saudi Arabia and Russia would extend voluntary oil cuts until the end of the year, sending the price of Brent crude to a 10-month high.

Brent oil was quoted at USD90.31 a barrel at the London equities close on Tuesday, up from USD89.01 late Monday.

The Saudi production cut of one million barrels per day which first took effect in July will continue "for another three months until the end of December 2023", the kingdom's energy ministry said in a statement.

Russia's export cut of 300,000 barrels per day will continue for the same period, Deputy Prime Minister Alexander Novak said in a separate statement.

Ashtead lost 2.6% despite reporting a strong start to its financial year, as it lowered its rental revenue outlook for the UK.

In the first quarter ended July 31, the industrial equipment rental company said revenue rose 19% to USD2.70 billion from USD2.26 billion a year before, as pretax profit climbed 11% to USD585 million from USD527 million.

Ashtead hailed "robust end markets" in North America, with a rise in US mega projects, but reported "softening" conditions in UK markets. Consequently, the firm lowered its rental revenue guidance for the UK, while its Canada and US rental revenue guidance remained the same.

For the UK, Ashtead expects rental revenue growth of 6% to 9%, down from its previous guidance of 10% to 13%. For the US, its rental revenue growth outlook remained between 13% and 16% and for Canada it remained between 15% and 20%.

In the FTSE 250, Trainline was one of the top performing stocks, closing 4.7% higher after Canaccord started the rail ticketing platform with 'buy'.

CMC Markets sat at the bottom of the index, meanwhile, closing 4.3% lower after Peel Hunt cut the online trading platform to 'add' from 'buy'.

Elsewhere in London, EnQuest dropped 11% after it announced a sharply lower interim profit and said it has applied to delist from the Nasdaq Stockholm.

For the first half of 2023, the UK and Malaysia-focused oil and gas producer reported a pretax profit of USD112.9 million, down 38% from USD182.6 million a year prior. Revenue declined 22% to USD732.7 million from USD943.5 million.

The company also said it has applied to delist its shares from the Nasdaq Stockholm due to the UK's departure from the EU.

"EnQuest has no legal or physical presence in Sweden and is therefore reliant on external support to ensure compliance with Nasdaq Stockholm listing requirements. This has created a source of additional unexpected compliance cost for the company," it explained.

On AIM, One Media IP Group jumped 9.1% after it said that it bought the licensor's income share of the Entertain ME catalogue for an undisclosed sum.

The digital music rights acquirer, publisher and distributor said the purchase of rights is on an in-perpetuity basis. One Media said it is immediately income accretive and will enhance both revenue and portfolio net asset value.

The catalogue includes tracks from a "wide range of high profile and enduring artists" including The Drifters, Gloria Gaynor, James Brown, and Judy Garland.

In European equities, the CAC 40 in Paris ended and the DAX 40 in Frankfurt both ended 0.3% lower.

Stocks in New York were largely lower at the London equities close, with the DJIA down 0.1%, the S&P 500 index down 0.2%, and the Nasdaq Composite flat.

SoftBank's Arm announced that it will target a valuation of up to USD52 billion when it lists on the Nasdaq. The chipmaker is looking to raise between USD4.5 and USD5.2 billion in its initial public offering, which would make it one of the largest tech IPOs in recent years.

Tuesday's valuation, however, represents a climb-down from the USD64 billion valuation at which SoftBank acquired the remaining 25% of Arm that it didn't already own last month. That acquisition was from Vision Fund, a Saudi-backed investment vehicle that is managed by SoftBank itself.

Gold was quoted at USD1,926.63 an ounce at the London equities close on Tuesday, sharply lower against USD1,938.92 at the same time on Monday.

In Wednesday's UK corporate calendar, there are full-year results from Barratt Developments, Ashmore and Darktrace. There will also be half-year results from Restaurant Group and trading statements from Halfords and WH Smith.

The economic calendar has a UK construction PMI print at 0930 BST and two services PMI readings for the US from 1445 BST.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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