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LONDON MARKET MIDDAY: Stocks slide amid risk-off mood after China data

7th Dec 2022 12:15

(Alliance News) - Stocks in Europe were mostly in the red on Wednesday, as economic data from China stoked fear of a global slowdown, while the FTSE 100 was spared a steeper decline thanks to gains by pharmaceutical stocks.

The FTSE 100 index was down 8.20 points, 0.1%, at 7,513.19. The FTSE 250 was down 83.57 points, 0.4%, at 19,016.51 and the AIM All-Share was down 5.74 points, 0.7%, at 834.45.

The Cboe UK 100 was down 0.3% at 751.63, the Cboe UK 250 was down 0.5% at 16,451.08, and the Cboe Small Companies was down 0.2% at 13,051.40.

Sterling was quoted at USD1.2164 at midday in London on Wednesday, lower than USD1.2243 late on Tuesday in London. Against the yen, the dollar was quoted at JPY137.48, up versus JPY136.46.

The euro traded at USD1.0501, lower than USD1.0519, but bounced off its morning low.

A reading on gross domestic product painted a stronger-than-expected picture of the single currency area's economy, strengthening the case for further interest rate hikes by the European Central Bank.

According to Eurostat, GDP rose 0.3% in the eurozone during the third quarter from the second. This slowed from quarterly growth of 0.8% in the second quarter, but was higher than a previous estimate of 0.2%.

On an annual basis, GDP rose 2.3% in the third quarter. It topped a previous estimate of 2.1%, but slowed from 4.2% annual growth in the previous quarter.

In European equities on Wednesday, the CAC 40 index in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.4%.

Meanwhile, developments in China on Wednesday were still front of mind for investors.

Authorities in Beijing announced a nationwide loosening of Covid restrictions, following protests against the hardline strategy that grew into calls for greater political freedoms.

Under the new guidelines, some asymptomatic and mild cases of Covid-19 can now quarantine at home, ending a requirement that all positive cases be isolated in centralised government facilities. 

However, any boost to sentiment the news might have provided was offset by concerning Chinese trade statistics, which pointed at a slowdown in global demand.

Imports fell 11% year-on-year in November, the biggest collapse since May 2020. Exports fell by 8.7%, the biggest drop since February 2020, when the country was mired in the early stages of the pandemic.

"The world's second largest economy is being hit by a toxic combination of its strict pandemic policies which have crushed domestic sentiment and the severe inflationary headwinds overseas affecting its shipments to [other] countries," said Hargreaves Lansdown's Susannah Streeter.

"The shivers of apprehension about the prospects for the world economy pushed oil prices to their lowest point in a year."

Brent oil was trading at USD78.63 a barrel at midday Wednesday, lower than USD80.35 late Tuesday. The lower price hit London's oil stocks, with their morning losses deepening by midday. BP, Shell and Harbour Energy lost 2.2%, 2.1%, and 2.8%, respectively.

GSK was up 8.1%, paring back its morning gains somewhat.

The pharmaceutical firm welcome a US verdict in a lawsuit which had claimed the Zantac heartburn drug caused cancer. The Florida lawsuit featured roughly 50,000 claims. However, the court said plaintiffs failed to provide enough "admissible primary evidence".

"Yesterday's ruling reflects the state of that science and ensured that unreliable and litigation-driven science did not enter the federal courtroom... GSK will continue to defend itself vigorously, including against all claims brought at the state level," GSK said.

"This outcome is probably the best GSK could have hoped for given how comprehensively the judge in the case dismissed the plaintiffs' arguments. While there is some risk of an appeal, and there are other cases outstanding, GSK will be sitting a lot more comfortably than it was before this judgement was handed down," said AJ Bell's Russ Mould.

GSK was the top blue-chip performer, closely followed by its consumer healthcare spinoff Haleon, up 5.0%. Haleon also had exposure to the Zantac litigation, as did Sanofi, which was 8.1% higher in Paris.

Dechra and AstraZeneca rose 2.6% and 1.4%, respectively, in a positive read-across for London pharmaceutical stocks.

Housebuilding stocks were still underperforming, following data on Wednesday showing a 2.3% fall in UK house prices in November. It marks the biggest monthly drop since 2008, according to the latest Halifax index.

Persimmon was down 1.4%, Barratt down 0.6%, and Taylor Wimpey down 0.9%.

In the FTSE 250, greeting card and gift firm Moonpig tumbled 13%.

In its first half ended October 31, Moonpig said pretax profit halved to GBP9.1 million from GBP18.7 million a year before. Revenue was flat at GBP142.8 million from GBP142.6 million, while selling and administrative costs climbed to GBP63.0 million from GBP47.0 million.

"Trading conditions have become progressively more challenging through October and November," Moonpig said, as it cut annual revenue guidance to GBP320 million from GBP350 million guided back in September.

Moonpig faces multiple headwinds, according to HL's Sophie Lund-Yates.

"Arguably the most pressing is the effect of Royal Mail strikes, which has badly affected UK orders. Much like retailers, Moonpig will have been relying on the festive season to supercharge the top and bottom lines, and operational disruption has resulted in a disappointing downgrade which has sent shares tumbling," she explained.

Mitchells & Butlers added 10%.

M&B reported annual pretax profit of GBP8 million in the year to September 24, swung from a loss of GBP42 million the year before. "Excluding the impact of utilities, profits broadly recovered to pre-Covid-19 levels," the pub chain said.

Revenue more than doubled to GBP2.21 billion from GBP1.07 billion.

Whilst noting a "highly challenging" trading environment, Chief Executive Phil Urban said he is encouraged by the strength of sales growth at the end of the financial year, which has since improved further.

"The only problem is that cost pressures remain intense. Having modelled various scenarios, the company says in an adverse situation there is a risk that debt covenants would be breached. That's something for investors to consider before getting carried away by the...rally in its share price today," said AJ Bell's Mould.

On AIM, MS International was up 13%.

The defence equipment manufacturer said profit multiplied in its first half after Russia's invasion of Ukraine led to a "more attentive audience" from buyers of military equipment

MS International posted a pretax profit of GBP3.5 million for the first half ended October 31, multiplying from GBP770,000 a year ago, as revenue rose by 27% to GBP42.0 million from GBP33.2 million.

The company declared an interim dividend of 2.00 pence per share, up 14% from 1.75p.

"The group has continued to perform strongly, growing our international businesses profitably in the face of these extremely challenging times," Executive Director Michael Bell said.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.4%.

By Elizabeth Winter, senior markets reporter

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