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LONDON MARKET MIDDAY: FTSE 100 perks up despite troubling China data

9th Aug 2023 12:09

(Alliance News) - Stock prices in London were higher at midday on Wednesday, shaking off more disappointing China data, while focus turns to Thursday's US inflation reading and what that could mean for future Federal Reserve decisions.

In the FTSE 100, insurer Hiscox shares fell, despite largely robust figures. Its half-year earnings had tinges of disappointment in the form of some difficulty in its retail arm and outflows in Hiscox ILS.

Miners were on the up, reversing Tuesday's weakness, despite more news of China's struggling economy.

The FTSE 100 index was up 66.71 points, 0.9%, at 7,594.13. The FTSE 250 was up 101.19 points, 0.5%, at 18,942.73, and the AIM All-Share was up 1.18 points, 0.2%, at 760.02.

The Cboe UK 100 was up 0.9% at 757.27, and the Cboe UK 250 was up 0.6% at 16,612.18, whilst the Cboe Small Companies was down 0.3% at 13556.75.

China slipped into deflation as consumer prices contracted last month for the first time in more than two years, official data showed, as slowing domestic spending weighs on the country's post-Covid economic recovery.

The consumer price index, the main gauge of inflation, fell 0.3% on-year in July, the National Bureau of Statistics said, having flatlined in June. Analysts polled by Bloomberg had anticipated a 0.4% decline in the index for July.

Stocks which are closely tied to China were on the up despite the data, recovering losses from Tuesday.

Asia-focused bank Standard Chartered was up 1.1%. Insurer Prudential, which is also Asia-focused, was up 1.5%.

Meanwhile, miners Anglo American, Antofagasta and Glencore were up 1.7%, 2.0% and 2.2%, respectively.

AJ Bell investment director Russ Mould said that the latest figures from China "may give central bankers in the US, UK and Europe pause for thought when they weigh up their next steps".

US inflation data, which will be released on Thursday at 1330 BST, may offer some direction to how central banks will react in the coming months.

US CPI data for July will be released on Thursday at 1330 BST. According to FXStreet consensus, markets are expecting a 3.3% annual rise in headline US consumer price inflation in July. Core inflation, however, is meant to cool slightly to 4.7% in July, from 4.8% in June.

Another inflation slowdown will be the ideal outcome, as it would take some sting out of Federal Reserve interest rate expectations.

On Tuesday, a leading US Federal Reserve official said he thinks interest rates may have peaked but warned they will need to stay inflated for a while.

In a speech, Patrick Harker, president of the Federal Reserve Bank of Philadelphia said: "Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold rates steady and let the monetary policy actions we have taken do their work."

Stocks in New York were called higher. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite are all called up 0.3%.

In the FTSE 100, Hiscox lost 6.2%.

The Hamilton, Bermuda-based insurer said in the first half of 2023, pretax profit jumped tenfold to USD264.8 million from USD25.4 million a year prior. The company's first half-year profit was almost as high as that of its entire 2022 profit of USD275.6 million.

Looking ahead, Hiscox said its portfolio is well positioned to deliver high-quality growth in earnings and revenue, citing investment income tailwinds and a long-term structural growth opportunity in retail.

It said its retail businesses have a promising outlook, though "tempered by our deliberate actions not to prioritise growth at the expense of quality of earnings".

In addition, Hiscox said its insurance-linked strategy arm ILS suffered net outflows of USD219 million, "as third-party capital investment appetite remains subdued".

Flutter Entertainment lost 4.4%.

It said its US arm reached an "inflection point", helping the gambling firm swing to a first-half profit.

The Paddy Power owner expects full-year earnings in line with market expectations, but warned of softer conditions in Australia.

In the FTSE 250, TP ICAP shares jumped 10%.

Revenue in the first half of the year climbed 4.8% to GBP1.13 billion from GBP1.08 billion a year prior. Pretax profit improved 26% to GBP91 million from GBP72 million.

TP ICAP declared a 4.8p per share interim dividend, up 6.7% from 4.5p. In addition, it said it is launching a GBP30 million share buyback programme.

"We will continue to assess opportunities to free up more cash to pay down more debt, and/or initiate further buybacks," it said.

Hill & Smith added 7.5%.

The Solihull, West Midlands-based infrastructure construction company said in the first half of 2023, pretax profit jumped 42% to GBP57.2 million from GBP40.2 million a year prior. Revenue rose 20% to GBP420.8 million from GBP349.9 million, which the company said was driven by US growth.

Looking ahead, the company expects a boost from US industrial growth drivers, with 2023 underlying operating profit expected to be modestly ahead of the current market consensus of GBP111.8 million, with a range of GBP110.2 million to GBP112.8 million. The consensus is 15% higher than GBP97.1 million Hill & Smith achieved in 2022.

Domino's Pizza rose 2.5%. Jefferies raised Domino's Pizza to 'hold' from 'underperform.'

On AIM, Enteq Technologies rose 20%.

The energy services technology and equipment supplier said its Saber drilling tool met test objectives during extensive downhole drilling testing in North America, providing a "game-changing" alternative to traditional rotary steerable systems.

Enteq said Saber has the potential to disrupt the RSS market within the drilling industry, which it claims is worth more than USD2 billion per year, claiming it can bring about "new levels of performance, both commercial and technical, for operators and service companies".

In European equities on Wednesday, the CAC 40 in Paris was up 1.2%, while the DAX 40 in Frankfurt was up 1.1%.

The pound was quoted at USD1.2735 at midday on Wednesday in London, up compared to USD1.2718 at the equities close on Tuesday. The euro stood at USD1.0977, higher against USD1.0947. Against the yen, the dollar was trading at JPY143.25, slightly lower compared to JPY143.29.

Brent oil was quoted at USD86.77 a barrel at midday in London on Wednesday, down from USD84.92 late Tuesday. Gold was quoted at USD1,925.88 an ounce, virtually unchanged against USD1,925.90.

By Sophie Rose, Alliance News reporter

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