LONDON MARKET MIDDAY: China slowdown causes European stocks to see red

(Alliance News) - Equities around Europe extended their decline at midday on Monday after weak ...

Alliance News 9 May, 2022 | 11:17AM
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(Alliance News) - Equities around Europe extended their decline at midday on Monday after weak trade data from China sent a scare through markets about the impact of the country's strict Covid lockdowns.

The FTSE 100 index was down 135.72 points, or 1.8%, at 7,252.22 midday Monday. The mid-cap FTSE 250 index was down 471.54 points, or 2.4%, at 19,348.60. The AIM All-Share index was down 19.52 points, or 2.0%, at 957.90.

The Cboe UK 100 index was down 2.0% at 722.85. The Cboe 250 was down 2.3% at 17,113.13 and the Cboe Small Companies down 0.8% at 14,717.15

In mainland Europe, the CAC 40 stock index in Paris was down 1.7%, while the DAX 40 in Frankfurt was 1.4% lower.

"The optimism that followed the US Federal Reserve meeting last Wednesday feels a long way off on Monday as the FTSE 100 dropped to its lowest levels since mid-March," AJ Bell investment director Russ Mould said.

"The continuing impact of Beijing's zero-Covid policy in China and concerns about the Fed's next moves are helping to pile the pressure on markets. The impact of Chinese restrictions was reflected in export growth hitting two-year lows in April – in effect back where we were near the start of the pandemic."

China's export growth slowed in April, customs data showed, as a Covid resurgence shuttered factories, sparked transport curbs and caused congestion at key ports.

Export growth plunged to 3.9% on-year last month, the Customs Administration said. While this was above analysts' expectations of 2.7% growth according to a Bloomberg poll, it marked the lowest rate since June 2020.

Import growth was flat in April, an improvement from a 0.1% contraction in March, as Chinese consumers remain hesitant under a welter of restrictions across the country.

Victoria Scholar, head of Investment at interactive investor, said: "China's trade sector accounts for around a third of GDP with the slowdown in exports pointing to a deceleration of international demand with sharp declines from the EU and US as inflation and the cost-of-living take their toll.

"Meanwhile domestically, China is dealing with the fallout from lockdowns, with factory activity and supply chains under pressure as Beijing pursues its draconian zero covid tolerance mission at the expense of its own economy."

Brent oil was quoted at USD109.07 a barrel Monday midday, sharply lower from USD112.74 late Friday.

"Oil prices are under pressure with WTI and Brent crude both lower by more than 1% driven by concerns about the global economy following softer Chinese trade data overnight. However the market remains underpinned by the prospect of an EU ban on Russian oil with talks continuing this week. Broader bearish sentiment that is weighing on equities is also hitting the oil market this morning spooked by concerns of a slowdown in Chinese demand and the prospect of rising interest rates around the world," ii's Scholar added.

Gold stood at USD1,859.40 an ounce, lower against USD1,886.77 on Friday.

London's big listed miners were feeling the heat from the disappointing China data. In the FTSE 100, Glencore was down 6.0%, Antofagasta 4.9%, Rio Tinto 4.7% and Anglo American 4.5%. Ferrexpo was down 8.9% in the FTSE 250.

Also in the FTSE 100, Rightmove shed 5.7%. Chief Executive Peter Brooks-Johnson announced he will step down as head of the online property portal.

He will remain in the role through to the announcement of the company's full-year results in February 2023. Brooks-Johnson has been with the company for 16 years, being appointed as chief operating officer in 2013 then CEO in 2017, but said he is leaving to "seek a new challenge".

Rightmove said it has started a "comprehensive process" to find his replacement.

"The company continues to make good progress with the implementation of its strategy, and trading in the year to date has been as expected. The board's expectations for the full year remain unchanged," it reassured.

In London's junior market, Ideagen surged 47% higher after it agreed to a GBP1.06 billion takeover offer from funds run by London-based private equity firm Hg Pooled Management.

Under the agreement, the Hg Pooled funds will acquire Ideagen for 350 pence per share, reflecting a 44% premium to the company's closing price of 243p on Friday last week and valuing its equity at GBP1.06 billion.

Ideagen expects the acquisition to be completed by July.

Ideagen said it unanimously recommends the offer from Hg Pooled, but remains in talks with private equity firm Astorg, which has been granted access to due diligence.

AIM-listed Tungsten Corp also was higher following an M&A update.

It rose 11% after withdrawing its recommendation of a US buyout and backed instead a GBP61.5 million offer from Gothenburg, Sweden-based Pagero Group.

Pagero has offered 48 per share to acquire the AIM-listed electronic invoicing and purchase order platform. The bid price is a 5.8% premium to Tungsten's closing price on Friday and 66% above the closing price on December 13, just before it entered an offer period.

The offer price is 14% higher than a 42p per share bid tabled by Irvine, California-based Kofax. That bid, which valued Tungsten at GBP53.7 million, was initially recommended by the firm. However, Tungsten on Monday said it has withdrawn its backing for the Kofax offer.

Instead, it has agreed to Pagero's GBP61.5 million bid. Pagero has the support of 36% of Tungsten shareholders.

New York was called to open with further losses on Monday, following the turgid European session.

AvaTrade's Naeem Aslam said: "Traders are worried that prospects of an economic slowdown are only increasing, and this could spur another bout of risk aversion among investors and traders."

The Dow Jones Industrial Average was called down 1.6%, the S&P 500 down 1.9%, and the Nasdaq Composite down 2.3%, based on futures trading. Last week, the Dow was flat, the S&P 500 shed 0.2% and the tech-heavy Nasdaq lost 1.5%.

The pound was quoted at USD1.2269 early Monday, down from USD1.2355 at the London equities close Friday.

The euro was priced at USD1.0541, lower against USD1.0576. Against the yen, the dollar was trading at JPY131.10, down from JPY130.34.

By Paul McGowan;

Copyright 2022 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Antofagasta PLC 1,133.28 GBX -2.68 -
Ferrexpo PLC 143.70 GBX -0.07 -
Rightmove PLC 640.20 GBX 0.41 -
Glencore PLC 484.65 GBX 0.36
Anglo American PLC 2,934.00 GBX -2.28
Rio Tinto PLC 4,840.50 GBX -1.58

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