24th Aug 2015 06:38
LONDON (Alliance News) - UK stocks were set to open heavily lower Monday as the continued rout in Asian stocks spreads to London, while oil prices have fallen to new lows.
In Asia Monday, the Nikkei in Tokyo ended down 4.6%, the Hang Seng was trading down 4.7%, and the Shanghai Composite was off 7.7%. Mounting evidence that China is going through a rough economic patch has hit the global commodities and equities markets.
Oil prices have fallen to new six-and-a-half-year lows. Brent oil hit a low of USD44.21 a barrel on Monday, while West Texas Intermediate fell to USD38.98 a barrel.
In response to the continued equities rout, China is planning to allow its state pension fund to invest in stock markets for the first time, the BBC reported, citing a report by Chinese official news agency Xinhua. The BBC said the new rules will allow the fund to invest up to 30% of its net assets in domestically-listed shares. The fund currently holds CNY35 trillion in assets, according to Xinhua. The fund will be allow to invest not only in shares but in a range of market instruments, including derivatives.
"There doesn't seem to be any particular catalyst for the intense panic selling that we're seeing, instead it's simply a case of fear breeding fear," said Craig Erlam, senior market analyst at Oanda.
"With all of this market volatility and panic coming from China, it seems any hope of a rate hike from the Federal Reserve in September have been well and truly dashed. I can't imagine policy makers wanting to step in and potentially make matters worse. They will surely want to analyse the market impact of these moves in the emerging markets thoroughly before doing something that could potentially set them off again," Erlam added.
Investors will be looking ahead to the Jackson Hole Symposium in the US later in the week for insight into the sentiment of Fed officials.
"The expected absence of [Federal Open Market Committee] Chair [Janet] Yellen, however, leaves little room for the Fed to explicitly communicate any intention to begin normalising policy in advance of its September meeting. And, with all the downside risks identified in the minutes of the FOMC's July meeting seemingly becoming more pressing, a September first hike from the Fed now seems still more finely balanced," said Nikesh Sawjani, macroeconomist at Lloyds bank.
IG said futures indicated the FTSE 100 to open 194.15 points lower at 5,993.5. The index closed down 2.8% at 6,187.65 on Friday, its lowest level of the year so far.
On Wall Street Friday, the DJIA closed down 3.1%, the S&P 500 ended down 3.2%, and the Nasdaq Composite closed off 3.5%.
On the London Stock Exchange, distribution and outsourcing company Bunzl said its pretax profit rose in the first half on the back of better revenue and said it has made four more acquisitions.
The FTSE 100-listed company, which distributes items such as plastic bags, latex gloves, safety goggles and cleaning supplies to retail and food industry clients, said its pretax profit for the six months to the end of June was up to GBP147.1 million from GBP132.3 million a year earlier, an 11% rise, on the back of a 7% rise in revenue to GBP3.14 billion from GBP2.94 billion.
Anglo American said it has reached a deal to sell its interest in two copper mines to a consortium for up to USD500 million. The subsidiary, Anglo American Norte SA, holds Mantoverde and Mantos Blancos copper mines located in northern Chile, and the FTSE 100-listed miner has agreed to sell them to an investor consortium led by Audley Capital Advisors LLP, with Orion Mine Finance as the principal co-investor, for an up-front cash consideration of USD300 million, with potential upside to up to USD500 million, it said.
Meggitt said it has won a USD25 million contract from Public Works Government Services Canada on behalf of the country's Department of National Defence. Under the deal, the FTSE 100-listed aerospace and engineering company said it will provide in-service support to the Canadian Armed Forces on the Meggitt Small Arms Trainer and Indirect Fire Trainer.
In a separate statement, the group said it acquired Meier Verpackungen in Austria, Steiner Industries in Chicago, Cater Plus in Adelaide, and Delta Hospitality in Brisbane.
In a very light economic calendar, there is the Chicago Fed National Activity Index at 1330 BST, before Federal Reserve Bank of Atlanta President Dennis Lockhart speaks at 2055 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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