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LONDON MARKET MIDDAY: Miners and oil majors continue to weigh FTSE 100

19th Jan 2023 12:23

(Alliance News) - Stock prices in London were lower at midday on Thursday amid rapidly fading hopes of a 'soft-landing' for the global economy and rising expectations of further aggressive tightening from the world's central banks.

The FTSE 100 index was down 84.82 points, or 1.1%, at 7,745.88. The FTSE 250 was down 265.93 points, or 1.3%, at 19,624.97, and the AIM All-Share was down 6.49 points, or 0.8%, at 852.61.

The Cboe UK 100 was down 1.0% at 775.20, the Cboe UK 250 was down 1.6% at 17,116.03, and the Cboe Small Companies was down 1.1% at 13,586.96.

The pound was quoted at USD1.2333 at midday on Thursday in London, lower compared to USD1.2366 at the close on Wednesday.

In London, mining and oil stocks were sharply lower at midday, knocking the commodity-heavy FTSE 100.

Investors were eyeing miners and oil majors with caution as rising Covid-19 cases in China and data on Tuesday revealing the nation's slowest economic growth in around 40 years put a damper on the outlook for future commodity demand.

Fresnillo was down 5.5%, Antofagasta down 4.7%, Anglo America down 3.3%, and Glencore down 3.4%.

BP lost 2.6%, while Shell was down 2.1%.

Brent oil was quoted at USD84.43 a barrel at midday in London on Thursday, down from USD87.16 late Wednesday. Gold was quoted at USD1,906.03 an ounce, lower against USD1,908.93.

In the FTSE 250, Dr Martens plunged 26% as the boot maker lowered its annual guidance due to "significant" operational issues.

London-based Dr Martens identified a bottleneck at its Los Angeles distribution centre, which it said was caused by a "combination of people and process issues".

It expects the impact of lost wholesale revenue and costs incurred as a result of the issues to hit annual earnings before interest, tax, depreciation and amortisation by around GBP16 million to GBP25 million.

Consequently, it now expects annual Ebitda in the financial year ending March 31 of between GBP250 million and GBP260 million. In financial 2022, the footwear brand posted Ebitda of GBP263.0 million.

Network International fell 8.6% despite reporting that its revenue rose in the final quarter of 2022, amid growth in the United Arab Emirates and Jordan.

The Middle East and Africa-focused payments provider said that in the three months to December 31, revenue grew 13% from a year prior.

For all of 2022, it expects to report revenue growth of 27% to USD438 million from an adjusted revenue total of USD345 million in 2021.

Elsewhere in London, fast fashion firm boohoo dropped 7.7%.

The firm reported that revenue in the fourth months ended December 31 fell by 11% to GBP637.7 million, from GBP714.5 million the previous year, in line with expectations.

Looking ahead, boohoo said its demand outlook is uncertain due to macro-economic factors, though it said cost inflation is expected to begin to moderate in the second half of the year.

"We have reduced inventory by 27% year on year and with this focus on careful inventory management, strong cost control and cash management, we will continue to drive operational and cost efficiency across the business," it said.

Nonetheless, revenue in the year ending February 28 is expected to decline by 12% year-on-year.

On AIM, Kodal Minerals soared 44% as the West Africa-focused mineral exploration and development firm agreed a conditional funding package of USD117.8 million for its lithium project in Mali.

The package will provide full financing for the development and commencement of production at the Bougouni lithium project in Mali and support a major exploration and development programme.

In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt both were down 1.5%.

The eurozone's current account swung to a surplus in November, figures from the European Central Bank showed.

The single currency area's seasonally adjusted current account recorded a EUR13.6 billion surplus in November, swung from a EUR500 million deficit in October. The figure was in line with the EUR14 billion surplus recorded in November 2021.

Nonetheless, European Central Bank Chief Christine Lagarde said the eurozone economy will fare "a lot better" this year than initially feared.

The economic "news has become much more positive in the last few weeks", Lagarde told an audience at the World Economic Forum in Davos.

The ECB's forecast of 0.5% growth this year is not "brilliant" but "it is a lot better than what we had feared", Lagarde said.

The euro stood at USD1.0817, slightly lower against USD1.0820. Against the yen, the dollar was trading at JPY128.69, higher compared to JPY128.49.

"The greenback has now given up most of the gains accrued in the second half of 2022, mainly due to expectations that the Fed will adopt a less aggressive stance towards controlling inflation in order to minimize the impact of the incoming contraction," said Ricardo Evangelista at ActivTrades.

"However, after yesterday's release of a batch of disappointing economic data, in an apparent paradox, the US currency found support as investors looked for the reassurance provided by the safe-haven dollar."

US retail and food services sales fell 1.1% month-on-month in November, while US industrial production fell in December.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.7%, the S&P 500 index down 0.7%, and the Nasdaq Composite down 0.8%.

"For once bad news really was bad news, rather than a positive because of the implications it might have for interest rates. Weak US retail sales suggested consumers' resilience may have been pushed beyond breaking point," said Russ Mould, investment director at AJ Bell.

"This undermined the hypothesis of a 'soft landing' for the US economy with inflation easing before rates have inflicted too much pain."

Still to come on Thursday's economic calendar, the US will publish weekly jobless claims at 1330 GMT.

By Heather Rydings, Alliance News senior economics reporter

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