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LONDON MARKET OPEN: Melrose shines on guidance; Synthomer sinks

7th Sep 2023 09:01

(Alliance News) - Stock prices in London opened in the red on Thursday, as concerns over oil prices, interest rates and weak Chinese data sapped risk appetite across global equities.

The FTSE 100 index opened down 13.54 points, 0.2%, at 7,412.60. The FTSE 250 was down 62.23 points, 0.3%, at 18,389.59, and the AIM All-Share was down 4.22 points, 0.6%, at 732.76.

The Cboe UK 100 was down 0.3% at 737.38, the Cboe UK 250 was down 0.4% at 16,011.52, and the Cboe Small Companies was marginally higher at 13,439.34.

"There's negative momentum across equities globally with Asian markets in the red overnight and the tech-heavy Nasdaq stateside closing down for the third straight session," said interactive investor's Victoria Scholar.

Miners like Anglo American and Rio Tinto, down 2.4% and 2.0%, were weighing on the FTSE 100, following weak trade data from China.

In European equities on Thursday, the CAC 40 in Paris was down 0.3%, while the DAX 40 in Frankfurt was down 0.4%.

UK house prices saw their sharpest monthly fall since last November in August, according to the Halifax House Price Index.

Halifax said average house prices in the UK fell 1.9% in August from July, having edged down by a revised 0.4% in July from June. August's decline was steeper than expected, with FXStreet-cited market consensus forecasting a 0.3% drop.

Annually, prices fell 4.6% in August, accelerating from the 2.5% fall in July. However, Halifax noted that prices were at a record peak last summer.

Housebuilders Persimmon Barratt fell 1.1% and 0.9% in early trading.

Elsewhere in the FTSE 100, Melrose Industries jumped 8.1%, following a set of upbeat interim results.

The aerospace manufacturer upgraded its annual guidance, expecting revenue between GBP3.35 billion and GBP3.45 billion. It guides for Aerospace adjusted operating profit between GBP375 million and GBP385 million, which is over 8% higher than prior guidance.

Trading was ahead of its expectations in the first half of 2023. Revenue rose to GBP1.63 billion from GBP1.36 billion, as pretax loss narrowed to GBP62 million from GBP314 million.

It declared an interim dividend of 1.5p for the period, and said it would begin its share buyback programme early, starting in October with GBP500 million shares to be repurchased over 12 months.

At the other end of the large caps was insurance firm Beazley, down 7.0%. The firm said it was on track to deliver full year growth and combined ratio guidance, as it reported a record half-year profit.

In the six months to June, it said insurance written premiums rose to USD2.92 billion from USD2.57 billion a year before, as pretax profit rose to USD366.4 million from USD364.9 million.

"Key highlights include significant growth in our North American property business and momentum in cyber across Europe. Our platform strategy and capital position have been important drivers in delivering our ambitious growth targets," said CEO Adrian Cox.

Meanwhile, packaging Smurfit Kappa announced plans to merge with New York listed WestRock to create 'Smurtfit WestRock'. It would entail combining the firms' "highly complementary portfolios" to create a "global leader in sustainable packaging".

"Smurfit WestRock would be incorporated and domiciled in Ireland with global headquarters in Dublin, Ireland and North and South American operations headquartered in Atlanta, Georgia. The potential combination would be effected through an Irish scheme of arrangement involving Smurfit Kappa and a merger of a subsidiary with WestRock," Smurfit said.

Smurfit shares were down 2.2%.

In the midcaps, Direct Line Insurance jumped 14%, as it announced a disposal alongside its interim results.

The insurer said it will sell its brokered commercial insurance business to RSA Insurance, a subsidiary of Intact Financial Corp, for a GBP520 million initial consideration, with a potential further consideration of up to GBP30 million. It also estimates a capital release of up to GBP270 million. The sale will allow the firm to "focus on retail, personal and direct small business commercial lines, restore the resilience of its capital position and drive the long-term value potential for its customers and shareholders", it said.

Its gross written premiums and associated fees in the first half grew 9.8% year-on-year, but its pretax loss widened to GBP76.3 million from GBP11.1 million, as a reduction in operating profit was partially offset by valuation movements on its investments.

Meanwhile, Synthomer plunged 29%.

The chemicals firm announced a rights issue around GBP276 million of shares to reduce its debt. This came alongside disappointing interim results, revealing a double-digit decline in revenue, as pretax profit plunged to GBP16.7 million from GBP115.5 million.

In forex, the pound dropped below USD1.25 in early exchanges in Europe, after dovish comments from Bank of England Governor Andrew Bailey on Wednesday.

"I think we are much nearer now to the top of the cycle," Bailey told a panel of cross-party lawmakers gathered to question the BoE chief on the state of the UK economy with UK inflation the highest among G7 nations.

He added that the fall in inflation "will be quite marked by the end of the year".

Sterling was quoted at USD1.2479 early Thursday, lower than USD1.2500 at the London equities close on Wednesday. The euro traded at USD1.0717, little changed from USD1.0715. Against the yen, the dollar was quoted at JPY147.49, down versus JPY147.67.

The dollar was also holding on to recent gains, after stronger-than-expected US services sector figures supported a 'soft landing' scenario which could mean monetary policy stays tighter, for longer.

However, US economic growth was modest in July and August, according to the Beige Book - the Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts, published eight times a year.

In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.7% and the Nasdaq Composite down 1.1%.

In Asia on Thursday, the Nikkei 225 index in Tokyo closed down 0.8%. In China, the Shanghai Composite fell 1.1%, while the Hang Seng index in Hong Kong was 1.4% lower in late dealings. The S&P/ASX 200 in Sydney was down 1.1%.

China's exports and imports sank again in August, data showed, as the world's second-largest economy struggles with sluggish global demand and a wider slowdown. However, the pace of contraction slowed from the previous month. Overseas shipments sank 8.8% on-year, the customs authority said, compared with a 14.5% plunge in July, while imports were off 7.3%, from a 12.4% retreat before.

The figures were also not as bad as feared. Economists surveyed by Bloomberg News had forecast both to fall 9%.

Gold was quoted at USD1,918.51 an ounce early Thursday, edging up from USD1,915.77 on Wednesday.

Brent oil was trading at USD90.27 a barrel, higher than USD90.01.

Still to come in the economic calendar, there's EU gross domestic product data at 1000 BST and the US weekly unemployment claims at 1330 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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