25th Sep 2023 12:06
(Alliance News) - Stock prices in London were lower at midday on Monday as investors fretted about the health of the Chinese economy and the prospect of interest rates remaining high in the US.
"The twin worries about the ongoing fragility in China's economy and high interest rates lingering for longer in the US have quashed hopes of a dose of Monday motivation to start the week," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The FTSE 100 index was down 48.43 points, or 0.6%, at 7,635.48. The FTSE 250 was down 170.26 points, or 0.9%, at 18,436.61, and the AIM All-Share was down 1.44 points, or 0.2%, at 737.99.
The Cboe UK 100 was down 0.7% at 761.70, the Cboe UK 250 was down 1.3% at 16,064.87, and the Cboe Small Companies was down 0.8% at 13,284.46.
Shares in Chinese property developer Evergrande plummeted Monday following the announcement that it would be unable to carry out a restructuring plan intended to guarantee its survival.
The news heightened fears around China's already fragile property market crisis and weighed on market sentiment as concerns of a global spillover grew.
"The property sector is very important to China's economy and therefore associated problems will weigh on the stock market. Investors are losing faith in China and this situation is only going to make matters worse for the markets," explained Russ Mould, investment director at AJ Bell.
Recently, risk appetite had already been suppressed by central banks hinting that more rate hikes are still on the table before the year-end.
On Wednesday, the US Federal Reserve left its benchmark interest rate at a 22-year high but signalled it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.
"The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee's goals," it said.
The hawkish pause triggered a fresh wave of worries that the rates would stay higher for longer, hurting stocks but boosting the US dollar.
The pound was quoted at USD1.2234 at midday on Monday in London, down from USD1.2267 at the London equities close on Friday. The euro stood at USD1.0636, lower against USD1.0664. Against the yen, the dollar was trading at JPY148.62, higher compared to JPY148.22.
In London, Entain was the worst blue-chip performer, trading 8.8% lower at midday on Monday.
The Ladbrokes owner reported that its online net gaming revenue has been weaker than expected during the third quarter of the year as it suffered from regulatory headwinds and unfavourable sporting results hurting its margins.
Nonetheless, Entain reiterated its expectation for full-year earnings before interest, tax, depreciation and amortisation to be within the range of GBP1.0 billion and GBP1.05 billion. This would be up from GBP993.2 million in 2022.
"Entain deserves some credit for maintaining its earnings guidance for the full year despite the disappointing third quarter showing as it keeps a tight rein on costs," AJ Bell analyst Russ Mould commented but added that regulatory affairs remain a "big threat" to bookmakers.
"The social harm from gambling is such that governments are stepping up their efforts to curtail the impact both in betting shops and on the internet. This means companies have to spend more on measures to mitigate problem gambling and that can lead to slower customer acquisition," he explained.
William Hill owner 888 Holdings dropped 5.8% in the FTSE 250 in a negative read-across.
Elsewhere in London, Gulf Keystone Petroleum jumped 7.8% after the company reported a consistent increase in local sales from the Shaikan field in Iraq.
Gulf Keystone said gross average sales currently stand at 33,000 barrels of oil per day. This was up from 28,800 bopd between September 1 and 24, 17,200 bopd in August and 4,900 bopd in July.
On AIM, SpaceandPeople plunged 25% after it reported a widened interim loss on rising costs.
The Glasgow-based retail, promotional and brand experience specialist said its pretax loss widened to GBP424,000, from GBP377,000 a year ago. SpaceandPeople said this was primarily due to an increase in administration expenses, including professional fees and staff costs.
Looking forward, the firm said it is confident in the second half, noting a recently agreed extension to its contract with Network Rail until September 2024.
"This half year has been encouraging for SpaceandPeople, with a drive to invest further across the business both in the UK and in Germany in order to develop products and services that are closely attuned to our customers evolving needs," said Chief Executive Nancy Cullen.
In European equities on Monday, the CAC 40 in Paris was down 0.6%, while the DAX 40 in Frankfurt was down 0.7%.
Germany's business climate worsened in September, as companies were again less satisfied with their current business situation, data from Munich-based research institution ifo showed.
The ifo business climate index worsened to 85.7 in September from 85.8 in August, the fifth consecutive fall, although faring better than FXStreet-cited expectations of 85.2.
Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, the S&P 500 index down 0.1%, and the Nasdaq Composite down 0.2%.
Amazon on Monday said that it will invest up to USD4 billion in Anthropic PBC and have a minority ownership position in the AI firm.
The Seattle-based online retailer said the investment was made alongside Anthropic PBC selecting Amazon Web Services as its primary cloud provider.
AWS will become Anthropic's primary cloud provider for mission-critical workloads, Amazon said, including safety research and future foundation model development, with Anthropic planning to run the majority of its workloads on AWS.
The deal intensifies competition between Amazon and Alphabet's Google, which had earlier opened its cloud services to Anthropic and invested USD300 million to acquire 10% of the company.
Shares in Amazon were up 1.0% in pre-market trade in New York on Monday, while Alphabet shares were down 0.1%.
Brent oil was quoted at USD92.00 a barrel at midday in London on Monday, down from USD92.32 at the close on Friday. Gold was quoted at USD1,924.04 an ounce, lower against USD1,927.93.
Still to come on Monday's economic calendar, the US Chicago Fed national activity index will be released at 1330 BST.
By Heather Rydings, Alliance News senior economics reporter
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