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(Alliance News) - Stock prices in London opened lower on Thursday as worries around the ailing Chinese property sector and the growing likelihood of interest rates remaining higher for longer weighed on market mood for yet another day.
"Cautious sentiment is dominating as oil prices ramp up while investors digest yet more unappetising news about China's fragile property sector, fuelling worries about contagion in the economy," said Susannah Street, head of money and markets at Hargreaves Lansdown.
The FTSE 100 index opened down 5.35 points, or 0.1%, at 7,587.87. The FTSE 250 was down 19.67 points, or 0.1%, at 18,200.56, and the AIM All-Share was down 0.52 of a point, or 0.1%, at 728.01.
The Cboe UK 100 was up 0.1% at 757.71, the Cboe UK 250 was down 0.1% at 15,855.40, and the Cboe Small Companies was flat at 13,204.18.
Beleaguered property developer China Evergrande suspended trading of its shares on the Hong Kong stock exchange on Thursday, according to notices posted by the bourse.
The halt in trading comes a day after a Bloomberg report that Evergrande's billionaire boss Xi Jiayin was being held by police under "residential surveillance".
Evergrande had only just resumed trading a month ago after the company was suspended for 17 months for not publishing its financial results.
On Sunday, the firm said it was unable to issue new debt as its subsidiary, Hengda Real Estate Group, was being investigated and on Friday it said meetings planned this week on a key debt restructuring plan would not take place.
"Evergrande's troubles represent a focal point in a long-standing property crisis that has had detrimental effects on the Chinese economy and severely undermined confidence in the housing market," said Stephen Innes at SPI Asset Management.
"The ongoing crisis has had far-reaching implications, including reduced consumer spending and investment in the real estate sector, which has had ripple effects throughout the Chinese economy. Moreover, it has raised concerns about the stability of the financial system and the potential for contagion to other sectors."
Worries about inflation and the need for interest rates to stay higher for longer have been reignited in recent days after oil prices began to edge nearer to the USD100 a barrel mark.
Oil prices have risen 30% since June after some of the world's biggest producers, including Saudi Arabia and Russia, announced a series of supply cuts to last until the end of this year.
"The psychologically important milestone of USD100 a barrel is in sight, which is prompting concerns about higher energy costs being passed on by companies in the form of higher prices. This might cause another temporary headache for central bank policymakers, but industry analysis forecasts that oil demand is expected to start slowing next year as weakening economic conditions take hold and more electric vehicles roll out onto the roads," HL's Streeter said.
Brent oil was quoted at USD94.84 a barrel early Thursday in London, down from USD95.52 at the time of the London equities close on Wednesday.
In London, Diageo climbed 0.7% as it confirmed that its expectations for its financial 2024 year, ending June 30, remain unchanged from those given at the release of its annual results in August.
The Guinness and Smirnoff owner said that it expects the challenging operating environment to persist but added that it will move "with speed and agility" to invest in marketing and innovation.
Chief Executive Debra Crew said the firm remains well-positioned to deliver its medium-term guidance for financial 2023 to financial 2025 of organic net sales growth consistently in the range of 5% to 7% and organic operating profit growth in the range of 6% to 9%.
In the FTSE 250, 888 Holdings dropped 14% after it announced that its performance so far in 2023 has been "mixed" with overall revenue for the third quarter expected to fall 10% to around GBP400 million.
The William Hill-owner said the main drivers behind this revenue decline were the ongoing impact of compliance changes in dotcom markets, the ongoing impact of safer gambling changes in the UK, the short-term impact of a change in marketing approach and customer friendly sports hitting its margin.
Looking forward, 888 expects revenue in the final quarter of the year to be higher than in the third but lower year-on-year by a mid-single digit. It expects to return to revenue growth in 2024.
Babcock International jumped 9.1% after reporting an "encouraging" start to its financial year, noting good organic revenue growth, an improved operational performance and high cash flow compared to the same period in the year prior.
The aerospace and defence company added that underlying profit has increased year-on-year thanks to revenue growth and continued operational improvement.
Elsewhere in London, Deliveroo climbed 9.4% after it proposed to return up to GBP250 million to its shareholders through a tender offer at a price between 115 pence and 135p per share.
The online food delivery service said the tender offer price represents a 6% to 24% premium to its closing price on Wednesday. The tender offer is subject to shareholder approval and its expected to open on Friday.
In European equities on Thursday, the CAC 40 in Paris was up 0.3%, while the DAX 40 in Frankfurt was up 0.2%.
In China on Thursday, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong closed down 1.4%. In Tokyo, the Nikkei 225 index closed down 1.5%. The S&P/ASX 200 in Sydney closed down 0.1%.
In the US on Wednesday, Wall Street ended mostly higher with the Dow Jones Industrial Average up 0.2%, the S&P 500 flat and the Nasdaq Composite up 0.2%.
The pound was quoted at USD1.2148 at early on Thursday in London, up slightly from USD1.2140 at the London equities close on Wednesday. The euro stood at USD1.0512, down a touch from USD1.0517. Against the yen, the dollar was trading at JPY149.30, lower compared to JPY149.42.
Gold was quoted at USD1,877.30 an ounce early Thursday morning in London, lower against USD1,880.42 at the London equities close on Wednesday.
Still to come on Thursday's economic calendar, the US weekly unemployment claims report and GDP print will be released at 1330 BST.
By Heather Rydings, Alliance News senior economics reporter
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