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LONDON MARKET CLOSE: Stocks slide on inflation and China growth fears

(Alliance News) - Stocks in London ended mostly lower on Monday as investors tracked weak Chinese ...

Alliance News 18 October, 2021 | 4:57PM
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(Alliance News) - Stocks in London ended mostly lower on Monday as investors tracked weak Chinese economic data and renewed fears that high inflation will lead to tighter global monetary policy.

China's economic growth tumbled more than expected in the third quarter, official data showed Monday, as the property sector struggled with tighter policy measures and an energy crisis loomed.

After a swift coronavirus bounce-back, recovery in the world's second biggest economy is losing steam, with gross domestic product growth coming in at 4.9% on-year, said the National Bureau of Statistics, citing an "unstable and uneven" domestic rebound.

The latest figure disappointed expectations of 5.0% growth predicted by analysts polled by AFP, and was a sharp three percentage points down from the 7.9% expansion in the April to June period. Industrial production growth slowed further to 3.1% on-year in September.

Economists believe China's growth slowdown likely stemmed from policy tightening this year in key areas including the property sector and a drive to cut emissions.

The FTSE 100 index closed down 30.20 points, or 0.4%, at 7,203.83. The FTSE 250 closed down 15.50 points, or 0.1%, at 22,968.74 and the AIM All-Share closed up 6.97 points, or 0.6%, at 1,236.07.

The Cboe UK 100 ended down 0.4% at 714.70, the Cboe UK 250 closed down 0.1% at 20,733.10 and the Cboe Small Companies ended up 0.1% at 15,599.70.

The CAC 40 stock index in Paris ended 0.8% and the DAX 40 in Frankfurt ended 0.7%.

"The mood in equity markets is downbeat on account of the disappointing data posted by China overnight, in addition to that, the tick higher in government bond yields is hurting stocks too. It was confirmed the Chinese economy expanded by 4.9% in the third quarter, narrowly missing the 5% that economists were expecting," said Equiti Capital analyst David Madden.

"Keep in mind, the economy grew by 18.3% and 7.9% in the first and second quarters respectively. The country is clearly cooling and that has prompted dealers to trim their exposure to stocks - which enjoyed a bullish run in the latter half of last week," Madden added.

In the FTSE 100, Fresnillo closed up 2.1% after UBS upgraded the Mexican gold miner to Neutral from Sell. The bank said production and operational issues that have dogged the company over the past few years are beginning to stabilise.

National Grid closed up 1.0% after the UK power lines operator said it was continuing to perform in line with expectations. It also expects underlying earnings per share this financial year to show a "marginally greater weighting" to the first half, which ended on September 30.

Conversely, the travel sector struggled with British Airways parent International Consolidated Airlines Group down 3.9%, at the foot of the FTSE 100 index. Budget carrier easyJet was down 2.7%, among the worst of the FTSE 250s.

BT Group ended down 2.2% after rival Virgin Media O2 launched its first joint product since being formed in a GBP31 billion merger earlier this year to take on the former state monopoly.

Customers of both brands can expect their pay monthly mobile data allowance to be doubled, while broadband speeds will be upgraded to the next available tier, free of charge. The firm is hoping its Volt offering will lure new customers who may only have one service but not the other, as well as those not currently using either.

"Today's declines in the FTSE100 have been across the board, with consumer discretionary feeling the impact of today's weakness. Companies like IAG and easyJet are under pressure along with the likes of Whitbread and IHG, with retailers and UK housebuilders also seeing weakness," said CMC Markets analyst Michael Hewson.

"On the plus side we've seen some outperformance from utilities after National Grid said it expected that earnings for the current fiscal year would be weighted towards the first half, and that profits for the year are expected to be in line with expectations," Hewson added.

Schroders lost 0.6%. The blue-chip fund manager said total assets under management rose 2.4% to GBP716.9 billion on September 30, the end of the third quarter, from GBP700.4 billion on June 30, the end of the second. Asset management AUM edged up just 0.2% to GBP527.2 billion from GBP526.1 billion, held back by a 1.2% decline in Institutional assets to GBP167.5 billion from GBP169.5 billion.

In the FTSE 250, Playtech ended the standout performer, up 58% at 677.00p, after the gambling software firm said it has agreed to a GBP2.1 billion takeover by Australia's Aristocrat Leisure.

The Playtech board has unanimously recommended the offer from Aristocrat, which manufactures gambling machines and casino management systems and also publishes mobile games. Aristocrat's 680 pence per share offer is a 58% premium to Playtech's closing price on Friday.

The offer values Playtech's equity at GBP2.1 billion. On an enterprise basis, meaning including debt, it values the FTSE 250 company at GBP2.7 billion.

The bid is "intended to be recommended unanimously by the board of Playtech". ASX 20-member Aristocrat has a market value of AUD29.24 billion, about GBP15.76 billion. Aristocrat is based in North Ryde, near Sydney. Playtech was founded in Estonia, but now is based in Isle of Man.

Elsewhere, THG closed up 20% after the Manchester-based online retail platform sought to rebuild investor confidence, after a disastrous capital markets day early last week resulted in a 34% share price slide that left analysts and investors with more questions than answers.

Founder & CEO Matthew Moulding, "in furtherance of good corporate governance", plans to give up his golden share. The special share allows Moulding to veto any takeover bid for three years.

It has been unpopular with investors and prevents THG from joining the FTSE 100 or FTSE 250 despite a market capitalisation of more than GBP3.50 billion.

"This cancellation will facilitate the group's application to step-up to the premium segment of the Main Market of the London Stock Exchange in 2022," THG explained.

The dollar was higher across the board. The pound was quoted at USD1.3711 at the London equities close, down from USD1.3780 at the close Friday.

The euro stood at USD1.1595 at the European equities close, down from USD1.1603 late Friday Against the yen, the dollar was trading at JPY114.28, up from JPY114.17 late Friday.

Stocks in New York were mixed at the London equities close following a strong finish on Friday.

The DJIA was down 0.2%, the S&P 500 index was flat and the Nasdaq Composite up 0.2%.

Walt Disney was the worst Dow performer, down 2.8%, after Barclays downgraded the entertainment company to Equal Weight from Overweight.

Brent oil was quoted at USD84.86 a barrel at the equities close, firm from USD84.73 at the close Friday.

Gold stood at USD1,768.25 an ounce at the London equities close, lower against USD1,773.75 late Friday.

The economic events calendar on Tuesday has eurozone construction output at 1000 BST.

The UK corporate calendar on Tuesday has annual results from housebuilder Bellway and trading statements from gambling firm 888 Holdings and money transfer provider Wise.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
BT Group PLC 171.90
Fresnillo PLC 888.00 -
National Grid PLC 1,024.80
Playtech PLC 718.00 -
Schroders PLC 3,475.00
THG PLC Ordinary Share 172.70 -
International Consolidated Airlines Group SA 142.34
The Walt Disney Co 150.81

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