Concern about economic strength in the world’s two biggest economies, the US and China, sent share prices lower early Thursday in London, after some weak data on Wednesday from the US amid continued threats of higher interest rates.
The FTSE 100 index opened down 35.16 points, or 0.5%, at 7,795.54. The FTSE 250 was down 102.44 points, also 0.5%, at 19,788.46, and the AIM All-Share was down 1.11 points, 0.1%, at 857.99.
The Cboe UK 100 was down 0.4% at 779.83, the Cboe UK 250 was down 0.6% at 17,276.03, and the Cboe Small Companies was down 0.5% at 13,670.19.
The pound was quoted at $1.2339 at early on Thursday in London, lower compared to $1.2366 at the close on Wednesday.
In London, Inform rose 1.9%, one of the best performers in the FTSE 100 in early morning trade.
The business publisher and events organiser said it has entered 2023 with continuing momentum thanks to a strong finish to 2022.
Chief Executive Stephen Carter pointed to strong performances in both Academic Markets and B2B markets and a strengthened balance sheet as evidence for the firm to deliver underlying growth in 2022.
Informa now expects to post revenue of more than £2.38 billion in the year, with adjusted operating profit anticipated at £530 million.
BHP fell 1.0%. The diversified miner reported improved interim performance in most of its operations and predicted that China will serve as a ‘stabilising force’ underpinning commodity demand in the year ahead.
For the the six months that ended December 31, BHP said copper production was up 12% to 834,400 tonnes from 742,000 tonnes a year earlier. Iron ore output was up by 2% to 132 million tonnes from 129.4 million tonnes.
Looking ahead, BHP said China will be a ‘stabilising force’ when it comes to commodity demand in the 2023.
‘China’s pro-growth policies, including in the property sector, and an easing of Covid-19 restrictions are expected to support progressive improvement from the difficult economic conditions of the first half. China is expected to achieve its fifth straight year of over 1 billion tonnes of steel production,’ the miner said.
However, amid rising Covid cases in China and data on Tuesday revealing the nation’s slowest economic growth in around 40 years, markets did not appear to share in BHP’s optimism on Thursday morning.
The gloomy picture for the Chinese economy knocked positive sentiment around the prospect of future demand, as China is one of the world’s largest commodity consumers.
BHP peers Fresnillo, Antofagasta and Glencore sank 2.8%, 3.3%, and 2.5%, respectively.
Oil majors Shell and BP also fell, tracking a declining Brent price. Shell was down 1.8%. BP was down 2.0%.
Brent oil was quoted at $84.15 a barrel at early in London on Thursday, down sharply from $87.16 late Wednesday. Gold was quoted at $1.915.05 an ounce, higher against $1,908.93.
In the FTSE 250, Dr Martens plunged 19% after the boot maker lowered its full-year outlook due to ‘significant’ operational issues.
In the three months ended December 31, Dr Martens reported revenue of £335.9 million, up 9% against the year prior and up 3% on a constant currency basis.
This was below its expectations due to slower-than-anticipated direct-to-consumer growth in the US and the impact of operational issues at its new Los Angeles distribution centre.
This bottleneck at the California site is expected to reduce wholesale revenue by between £15 million and £25 million and earnings before interest, tax, depreciation and amortisation by between £16 million and £25 million.
As a result, Dr Martens now expects financial 2023 revenue growth between 11% to 13% on an actual currency basis. It also estimates full-year Ebitda between £250 million and £260 million.
Elsewhere in London, Deliveroo rose 5.4% after it said it has delivered ‘significant’ improvements toward profitability during 2022, despite a difficult consumer environment.
For the full year, gross transaction value increased to £7.08 billion for all operations, including results from Australia and the Netherlands until operations there ended in November 2022. This represents year-on-year growth of 7% in reported currency and 5% in constant currency.
As a result, Deliveroo now expects to report an adjusted Ebitda margin of negative 1.0%. This is better than previous guidance of between negative 1.2% to negative 1.5%.
In European equities on Thursday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both down 0.5%.
The euro stood at $1.0818, flat against $1.0820 at the European equities close on Wednesday. Against the yen, the dollar was trading at JP¥128.15, down compared to JP¥128.49.
In Tokyo on Thursday, the Nikkei 225 index closed down 1.4% as Japan logged its largest-ever annual trade deficit last year.
The resource-poor country is heavily dependent on imported fossil fuels, which became sharply more expensive last year, largely due to Russia’s invasion of Ukraine.
In 2022, the value of imports was JP¥19.97 trillion, or $155 billion, higher than exports – Japan’s largest-ever deficit. Comparable data has been available since 1979.
The reading also marked a jump from Japan’s previous record trade deficit of JP¥12.82 trillion in 2014.
In China, the Shanghai Composite closed up 0.5%, while the Hang Seng index in Hong Kong closed down 0.1%. The S&P/ASX 200 in Sydney closed up 0.6%.
In the US on Wednesday, Wall Street ended lower, following the release of poor retail sales data and hawkish words from a top US Federal Reserve official.
The Dow Jones Industrial Average ended down 1.8%, the S&P 500 down 1.6% and the Nasdaq Composite down 1.2%.
St Louis Fed President James Bullard said US monetary policymakers should get the key interest rate to above 5% as quickly as possible, Reuters reported on Wednesday.
Only then should the Fed pause rate hikes, Bullard suggested.
Bullard said the Fed’s decisions to turbocharge rate hikes, by enacting lifts of 75 and 50 basis points, has been a success and should continue for now.
His words came after a report showing US retail and food services sales fell 1.1% month-on-month in November, while US industrial production fell in December.
‘Yesterday’s weak US industrial production and retail sales triggered a fall in 10-year [Treasury] yields to their lowest level since mid-September and equities fell too,’ said Kit Juckes at Societe Generale.
‘We’ve been snuggled up in expectations of a soft landing for the US economy, and the dollar’s been falling against everything as China reopens, and monetary policy normalises. Take away the blanket and it feels chilly.’
Still to come on Thursday’s economic calendar, the latest US initial jobless claims reading will be released at 1330 GMT.
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Issue Date: 19 Jan 2023
