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(Alliance News) - Stocks in London were set to start flat on Wednesday, as weak economic data from China pointed to a "deep malaise" in the global economy, though this was offset by news that Asia's largest economy will loosen its strict zero-Covid measures.
"Having seen another lacklustre and negative session for European and US markets yesterday, there appears very little interest to drive markets higher in the short term, as we look ahead to next week's central bank meetings from the Federal Reserve, as well as the European Central Bank and Bank of England," said CMC Markets' Michael Hewson.
UK house prices fell in November from October, as the rate of annual growth slowed to 4.7% from 8.2% in October, new figures from Halifax showed.
House prices fell by 2.3% in November from October, compared to a slip of 0.4% in October from September.
"While a market slowdown was expected given the known economic headwinds – and following such extensive house price inflation over the last few years (up 19% since March 2020) – this month's fall reflects the worst of the market volatility over recent months," said Halifax Director Kim Kinnaird.
The price of a typical UK property now stands at GBP285,579, down from GBP292,406 in October.
Meanwhile, China announced a nationwide loosening of Covid restrictions, following protests against the hardline strategy that grew into calls for greater political freedoms.
Under the new guidelines, some asymptomatic and mild cases of Covid-19 can now quarantine at home, ending a requirement that all positive cases be isolated in centralised government facilities.
This comes as official figures showed China's imports and exports plunged in November to levels not seen since early 2020.
Beijing's zero-Covid policy of snap lockdowns, travel curbs and daily mass testing has left businesses reeling, disrupted supply chains and damped consumption.
November imports fell 11% year-on-year, the biggest collapse since May 2020. Exports fell by 8.7% year-on-year, the biggest drop since February 2020, when the country was mired in the early stages of the pandemic.
"Recent economic numbers...point to a deep malaise, not only in the Chinese economy but also more globally," Hewson said.
"Even as the Chinese economy has underperformed domestically, the exports part of the equation had until recently been performing well. Unfortunately, even here we are now starting to see weakness as global consumers cut back on higher prices, and a weaker economic outlook," he explained.
Amid concerns about global demand, the price of Brent oil fell below USD80 for the first time since Russia's invasion of Ukraine.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 0.8 points at 7,520.59
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Hang Seng: down 1.2% at 19,208.76
Nikkei 225: closed down 0.7% at 27,686.40
S&P/ASX 200: closed down 0.9% at 7,229.40
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DJIA: closed down 350.76 points, 1.0%, at 33,596.34
S&P 500: closed down 1.4% at 3,941.26
Nasdaq Composite: closed down 2.0% at 11,014.89
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EUR: down at USD1.0451 (USD1.0519)
GBP: soft at USD1.2112 (USD1.2243)
USD: up at JPY137.77 (JPY136.46)
GOLD: lower at USD1,772.28 per ounce (USD1,774.71)
OIL (Brent): down at USD79.50 a barrel (USD80.35)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
11:00 CET EU gross domestic product
11:00 CET EU employment
11:00 GMT Ireland industrial production and turnover
09:30 GMT UK narrow money and reserve balances
07:00 EST US MBA mortgage applications survey
15:00 EST US consumer credit
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US President Joe Biden celebrated the strengthening of his party's majority in the Senate, after Democrat Raphael Warnock was declared the winner of a runoff election in Georgia. The incumbent senator defeated Republican Herschel Walker, a former football star and protege of former president Donald Trump, according to projections by television networks. Warnock's win confirms the very slim Democratic majority – 51 to 49 – in the upper house of Congress. The party's electoral triumph does not change the balance of power in the Senate, of which Democrats had already secured control on November 8. But the win by Warnock hands Democrats greater control in committees and curbs the power of any individual Democratic senator to sink Biden initiatives.
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German industrial production was largely stagnant in October, according to the latest figures from Destatis. Industrial production edged down 0.1% on a monthly basis in October, and remained flat on an annual basis. In September, it had increased 1.1% on a monthly basis and by 3.1% on an annual basis. Excluding energy and construction, industrial production was down by 0.4% in October from the month before but up 0.8% on an annual basis.
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BROKER RATING CHANGES
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Barclays raises Haleon to 'overweight' (equal weight) - price target 360 (298) pence
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JPMorgan places SGS and RS Group on 'negative catalyst watch'
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JPMorgan cuts Johnson Matthey to 'underweight' (neutral) - price target 2,000 (2,150) pence
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COMPANIES - FTSE 100
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GSK welcomed a US verdict in a lawsuit which had claimed the Zantac heartburn drug caused cancer. The Florida lawsuit featured roughly 50,000 claims. However, the court said plaintiffs failed to provide enough "admissible primary evidence". "In a products liability multi-district litigation, the plaintiff must have admissible primary evidence with which to establish general causation," a statement read. "As a result, if the plaintiff does not have this evidence, then there is no genuine dispute of material fact, and the defendant is entitled to judgment as a matter of law." In response, GSK said: "GSK welcomes yesterday's ruling by the MDL Court. Following the 12 epidemiological studies conducted looking at human data regarding the use of ranitidine, the scientific consensus is that there is no consistent or reliable evidence that ranitidine increases the risk of any cancer."
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COMPANIES - FTSE 250
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Mitchells & Butlers reported annual pretax profit of GBP8 million in the year to September 24, swung from a loss of GBP42 million the year before. "Excluding the impact of utilities, profits broadly recovered to pre Covid-19 levels," the pub chain said. Revenue more than doubled to GBP2.21 billion from GBP1.07 billion. Whilst noting a "highly challenging" trading environment, Chief Executive Phil Urban said he is encouraged by the strength of sales growth at the end of the financial year, which has since improved further.
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Commercial vehicle rental provider Redde Northgate reported strong growth in its first half ended October 31. Revenue rose 14% year-on-year to GBP696.3 million from GBP612.9 million, as growth in vehicle hires and claims & services offset a decline in vehicle sales. Pretax profit jumped 42% to GBP101.9 million from GBP71.7 million. The firm's interim dividend of 7.5 pence per share marks a 25% increase. "Demand for our services continues to be robust across geographies along with continuing strength in residual values," the Redde Northgate said. It now expects its full-year results to be "modestly above" market expectations.
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Games Workshop said trading since September has been in line with expectations. For its first half ended November 27, it expects revenue of no less than GBP210 million, compared to GBP191.5 million a year before. Pretax profit is estimated at no less than GBP83 million, down from GBP88.2 million in the prior year. The wargames maker will pay out GBP1,500 cash to each of its employees this month, as part of its profit share scheme. It also announced the promotion of John Brewis to non-executive chair. Brewis has been senior independent director since 2021, and his new role becomes effective on January 1.
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OTHER COMPANIES
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Seed Innovations said the unit holders of portfolio company Fralis - which trades as Leap - have agreed to sell Leap to an existing unit holder IMG Arena US, based on an enterprise value of EUR14 million. IMG will become the sole owner of Leap after the transaction. Seed expects to receive around EUR5.6 million in cash over a two-year period, as well as the repayment of a EUR250,000 term loan plus interest. The expected total blended return on investment over all the Leap investments is "disappointing" at 4%, Seed noted. "It is not the exit we envisaged but provides liquidity and enables Seed to continue to refocus our investment portfolio whilst at the same time setting Leap up for further success in the future," said CEO Ed McDermott.
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By Elizabeth Winter, senior markets reporter
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