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LONDON MARKET OPEN: Stocks slide as market mood remains downbeat

26th Sep 2023 08:46

(Alliance News) - Stock prices in London slid lower on Tuesday as concerns around the health of the world's second-largest economy continued to cloud market mood.

The FTSE 100 index opened down 11.10 points, or 0.2%, at 7,612.89. The FTSE 250 was down 52.14 points, or 0.3%, at 18,363.17, and the AIM All-Share was down 1.61 points, or 0.2%, at 732.91.

The Cboe UK 100 was down 0.1% at 759.63, the Cboe UK 250 was down 0.5% at 15,969.89, and the Cboe Small Companies was down 0.1% at 13,245.07.

Concerns over China's economic stability resurfaced on Monday after China Evergrande Group announced that it was unable to issue new debt as its subsidiary was "being investigated".

Stephen Innes, managing partner at SPI Asset Management said while the development may not surprise those closely following China's property market, it has nonetheless reignited concerns that the country's housing sector is still deteriorating and that financial stability risks are "rising".

"Furthermore, there is a growing sense of unease regarding whether China's authorities are taking sufficient measures to support the overall economy...Even if Chinese authorities were to unveil a substantial stimulus program, focusing on measures like cash transfers or new infrastructure projects, it would likely prove inadequate in addressing the multifaceted challenges confronting the Chinese economy," Innes said.

In China on Tuesday, the Shanghai Composite closed down 0.3%, while the Hang Seng index in Hong Kong was down 0.9%. In Tokyo, the Nikkei 225 index closed down 1.0%. The S&P/ASX 200 in Sydney closed down 0.5%.

In London, water utilities suffered in early morning trade after the UK Water Services Regulation Authority announced that the "majority" of water and wastewater companies in England and Wales will have to return GBP114 million to customers next year.

The rebate will come off customers' bills for next year.

"The targets we set for companies were designed to be stretching - to drive improvements for customers and the environment. However, our latest report shows they are falling short, leading to GBP114 million being returned to customers through bill reductions," said Ofwat Chief Executive David Black.

United Utilities was down 0.3%, Severn Trent down 0.5% and Pennon down 0.9%.

Smiths Group was among the worst performers in the FTSE 100 in early morning trade, down 1.1% despite reporting its annual profit had more than tripled.

The engineering firm reported a pretax profit of GBP360 million in the year ended July 31, multiplied from GBP103 million the previous year.

Smiths also noted that it was a "record" year of organic revenue growth and said it is now "well positioned" for its financial 2024 growth targets which see organic revenue growth between 4% and 6%.

In the FTSE 250, AG Barr climbed 2.1% after it said it was confident of delivering full-year profit in line with recently increased market expectations following a strong first-half performance.

The Irn-Bru maker reported a reported profit of GBP27.8 million in the six months ended July 30, up from GBP24.7 million the previous year, despite its cost of sales jumping 48% year-on-year to GBP131.0 million.

Revenue in the half climbed 33% to GBP210.4 million from GBP157.9 million, supported by the contribution of the Boost Drinks business which was acquired by the firm in December.

"In August we communicated our expectation of delivering a full year profit performance marginally above the top end of analyst consensus. Despite the extended period of poor weather across the summer, we remain confident in delivering in line with these revised market expectations," the company said.

Elsewhere in London, Asos fell 1.0% as it a double-digit percentage decline in revenue in the 53 weeks ended September 3.

The online fashion retailer reported total group revenue had declined by 10% year-on-year in the 53-week period, noting that UK sales had fallen 12% year-on-year, while EU and US sales fell 1% and 6%, respectively.

Sales in the Rest of the World dropped 29% against the comparative period.

Asos added that its earnings before interest and tax are expected around the bottom of the guided GBP40 million to GBP60 million range for the full year.

In European equities on Tuesday, the CAC 40 in Paris was down 0.9%, while the DAX 40 in Frankfurt was down 0.7%.

Wall Street ended higher on Monday with the Dow Jones Industrial Average up 0.1%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.5%.

On Monday, the Moody's ratings agency warned that a US government shutdown this weekend, amid political deadlock in Congress, would have negative implications for the country's top-tier credit rating.

A shutdown "would underscore the weakness of US institutional and governance strength relative to other AAA-rated sovereigns," Moody's wrote.

"Further, a prolonged shutdown would be disruptive to the US economy and financial markets, with potential negative ramifications for the sovereign's debt affordability," it added.

The safe-haven dollar gained ground on Tuesday morning amid the economic uncertainty.

Sterling was quoted at USD1.2175 early Tuesday, down from USD1.2211 at the London equities close on Monday. The euro traded at USD1.0584, slightly lower than USD1.0589. Against the yen, the dollar was quoted at JPY149.04, higher versus JPY148.81.

Gold was quoted at USD1,912.43 an ounce early Tuesday, lower than USD1,918.62 at the London equities close on Monday. Brent oil was trading at USD90.74 a barrel, lower than USD91.44 late Monday.

Still to come on Tuesday's economic calendar, there is a US consumer confidence print at 1500 BST.

By Heather Rydings, Alliance News senior economics reporter

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