JPMorgan Chinese Share News (JMC)

LONDON (Alliance News) - Share prices in London were swamped by a global equities sell-off Monday, after a rout in Chinese stocks sent the Shanghai Composite to its biggest daily loss since 2007.

The FTSE 100 closed down 1.1% at 6,505.13, its fifth straight day of losses. The blue-chip index is back in the red for the year to date. The FTSE 250 ended 1.3% lower at 17,267.56, and the AIM All-Share index closed down 1.0% at 747.77.

European stock markets incurred even heavier losses than London, with the CAC 40 in Paris and the DAX in Frankfurt both closing 2.6% lower.

On Wall Street at the London close, the DJIA was down 0.7%, the S&P 500 was down 0.4% and the Nasdaq Composite was off 0.7%.

New York stocks were being sold despite a report from the US Commerce Department saying US manufactured durable goods rebounded in June following a sharp decline in May. The report said durable goods orders jumped by 3.4% in June following a revised 2.1% decrease in May. Economists had expected orders to increase by 3.1% compared to the 2.2% drop that had been reported for the previous month.

The bigger-than-expected increase in durable goods orders primarily reflected a rebound in orders for transportation equipment, which surged by 8.9% in June after tumbling by 6.1% in May.

"Interestingly, however, even with a strong afternoon of data, the dollar took a bit of a beating from the pound and the euro. This perhaps is due to pre-FOMC statement jitters, with it unclear how firm the Fed will be in pointing towards a September lift-off on Wednesday," said Connor Campbell, financial analyst at Spreadex.

The US Federal Open Market Committee is meeting this week and will issue an interest rate decision and monetary policy statement at 1900 BST on Wednesday.

At the London close, the pound traded at USD1.5577 and the euro at USD1.1101.

In China, the Shanghai Composite closed 8.5% lower, its biggest single-day fall in over eight years, dragged down by weakening commodity prices and soft Chinese industrial profit data.

After weak manufacturing data released last week, figures from the National Bureau of Statistics released Monday showed that profits earned by Chinese industrial enterprises fell 0.3% in June from a year earlier, reversing a 0.6% rise in the preceding month.

The weakness seen in economic data in China and the large falls seen in the Chinese stock market highlight that the world's second-largest economy is struggling to keep up its growth momentum, according to Janwillem Acket, chief economist at Julius Baer.

"Based on a sound plan, China is undergoing a transformation away from heavy industry and manufacturing-based aggressive exports to a more inward-looking high-tech and consumer-based economy. A liberalised financial sector seemed in many aspects to follow the United States as a role model," Acket said.

"With this transition it was always clear that China's growth momentum would trend lower in the coming years and be on healthier footing. But the latest weak economic readings show that China, the major global growth locomotive of the last years and largest importer of commodities, is coughing now," Acket added.

China-exposed stocks traded in London closed heavily lower Monday, with Fidelity China Special Situations closing down 7.1% and JP Morgan Chinese Investment Trust down 4.5%.

Reckitt Benckiser was one of the few FTSE 100 gainers, closing up 1.4%. The consumer goods company said it has upgraded its like-for-like revenue growth target for the full year after its pretax profit rose in the first half thanks to a solid performance across the business. It said its pretax profit for the six months to the end of June was GBP921 million, up from GBP838 million a year earlier.

Reckitt Chief Executive Rakesh Kapoor said that, following its robust first-half performance, the company now expects to exceed the targets it set at the start of the year and is targeting like-for-like revenue growth of 4% to 5% for the full year. In its full-year results in February, the group had set out a target for 4% like-for-like net revenue growth in 2015.

At the other end of the index, Pearson led fallers, closing down 4.4%. The educational publishing company confirmed on Saturday it is talks to sell its 50% stake in the Economist Group, just two days after it announced the sale of the FT Group, which includes the Financial Times, to Japanese media group Nikkei Inc for GBP844 million.

Pearson made the announcement following a report by CNBC that the company was in negotiations to sell the stake, which was not included in the deal to sell the FT Group, to other shareholders in the Economist, citing people familiar with the situation.

Merlin Entertainments was another big faller in the index, ending down 3.9%. The theme park operator said it expects its full-year results to be below its previous forecasts due to the roller-coaster crash at its Alton Towers theme park in June, even as its half-year results showed a rise in profit and revenue along with a slight hike to its dividend.

Merlin's Alton Towers theme park was shuttered back in June after a serious accident occurred on the Smiler ride. People on the Smiler ride were trapped 25 feet up at a 45 degree angle for up to four-and-a-half hours after two carriages collided, resulting in 16 people being injured, including four seriously.

Since the crash, Merlin has reviewed its safety and operating procedures, alongside the UK's Health & Safety Executive, and said shortly after the accident that the Smiler ride will remain closed for the foreseeable future.

Merlin said that while it still anticipates its results for the first half of 2015 will be in line with its previous expectations, its results for the full year in its theme parks business are set to take a hit from the temporary closure of the park, the suspension of UK theme park marketing, and temporary ride closures.

In the FTSE 250, Petra Diamonds was one of the biggest gainers, up 3.1% despite saying revenue fell by around 10% in the last financial year due to lower diamond prices. The miner said production in the year ended June 30 was up 2% to 3.2 million carats from 3.1 million carats but said revenue fell by 10% to USD425.0 million from USD471.8 million as average diamond prices fell and because of the "very mature nature" of its production assets.

Investec said it is "encouraged that these latest results are reasonably in line and full-year results will provide more clarity", adding that they were weaker year-on-year, but that it had expected that.

"Petra remains a growth story even if diamond prices are flat, as the rise to 5 million carats for financial year 2019 is on track and increased fresh ore is starting to contribute to lift output in the year ahead," the broker said.

Food producer Cranswick said its first-quarter trading was in line with its expectations, with a rise in revenue and higher underlying sales year-on-year. The company, which makes food products including sausages and pies, said its revenue in the first quarter to the end of June was up 8% year-on-year on the back of robust volume growth across most product categories. Cranswick shares closed up 2.3%.

In the economic calendar Tuesday, investors will be looking to a preliminary reading of UK second quarter GDP at 0930 BST. In the afternoon, there are the US Markit services and composite purchasing managers' indices at 1445 BST and consumer confidence at 1500 BST.

In the UK corporate calendar, there are half-year results from BP, GKN, and ITV, while Next issues a second quarter trading statement. From FTSE 250-listed companies, there will be half-year results from Provident Financial Group, Shawbrook Group, Virgin Money, SEGRO, Tullett Prebon, Rathbone Brothers, Informa, Domino's Pizza Group, Jardine Lloyd Thompson, Pace, Drax Group and Elementis.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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