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(Alliance News) - Stocks in London are set to open on the backfoot on Monday, with worrying data from China showing exports from the world's second-largest economy have slowed, while the government also tightens its Covid restrictions.
In early corporate news in London, West End property firms Shaftesbury and Capital & Counties are in talks for an all-share merger. Victrex interim sales rose, Energean discovered new gas in Israel, NCC has tapped a new chief executive, and Kosmos Energy revenue has surged.
IG futures indicate the FTSE 100 index will open down 41.44 points, or 0.5%, at 7,346.50 on Monday. The index closed down 115.33 points, or 1.5%, at 7,387.94 on Friday
"Today's European open looks set to be a negative one, after Asia markets also slid back, with little sign that Chinese leaders were contemplating shifting their zero-Covid policy," CMC Markets analyst Michael Hewson explained.
Millions of people in Beijing stayed home on Monday as China's capital tries to fend off a Covid-19 outbreak with creeping restrictions on movement. Beijing residents fear they may soon find themselves in the grip of the same draconian measures that have trapped most of Shanghai's 25 million people at home for several weeks.
Officials there have said the eastern powerhouse city is winning its battle against China's worst outbreak since the pandemic began. Yet the Shanghai lockdown has intensified, causing outrage and rare protest in the last major economy still glued to a zero-Covid policy.
Brent oil was quoted at USD112.07 a barrel Monday morning, soft from USD112.74 late Friday. Gold stood at USD1,872.80 an ounce, lower against USD1,886.77.
In Asia on Monday, the Japanese Nikkei 225 index closed down 2.5%. In China, the Shanghai Composite was 0.1% lower. The S&P/ASX 200 in Sydney ended down 1.2%. The Hong Kong market was closed for a holiday on Monday.
Oanda's Jeffrey Halley said: "There is no one theme that is causing Asian equities to crater, but if I had to pick one, it would be that concerns over the depth of the China slowdown are accelerating, with virus restrictions tightening in Beijing and, apparently, Shanghai once again."
China's export growth slumped in April to its lowest level in almost two years, customs data showed Monday, 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 Monday.
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.
In Japan, data from Jibun Bank and S&P Global showed the country's services sector posted a return to expansion territory in April, allowing the wider private sector to edge upwards to a five-month high.
The au Jibun Bank services purchasing managers' index rose to 50.7 points in April from 49.4 in March, rising above the 50.0 no change mark, indicating that the sector has moved barely into expansion territory.
Figures from Monday last week showed that the headline manufacturing PMI dipped to 53.5 in April from 54.1 in March, indicating slower growth.
As a result, the composite PMI, a weighted average of services and manufacturing, rose to 51.1 in April from 50.3 in March, as a stagnation of new orders eased pressure on the private sector's capacity and allowed for work on outstanding business to take place.
In London, midcap speciality chemicals firm Victrex reported a drop in profit in the first half but did see a bounce in sales in what it called a "strong" performance.
In the six months to March 31, pretax profit slipped 6% to GBP43.6 million from GBP46.6 million in the same period a year prior. Victrex blamed the drop on a GBP4.6 million exceptional item cost relating to a one-off software implementation expense.
"The company has commenced a multi-year implementation of a new cloud-based ERP system. The company forecasts to spend approximately GBP17 million on the implementation, which will deliver benefits to both customer interactions and internal business processes," the company explained.
Revenue was up 6% to GBP160.1 million from GBP150.9 million. Sales volume increased 8% to 2,264 tonnes from 2,087 tonnes.
Chief Executive Jakob Sigurdsson said: "This is a strong first half, with further improvement across all end-markets, good progress in our Medical business as elective surgeries return in greater numbers and improved average selling prices compared to the second half of 2021."
Cybersecurity firm NCC Group has appointed auditor EY's head of cybersecurity to be its new chief executive. Mike Maddison will replace Current CEO Adam Palser, who will step down in mid-June.
NCC also said its second half trading has been strong and now expects revenue to be "substantially" higher than the year before and also the first half. In the six months to November 30, the company's first half, revenue was GBP150.1 million.
NCC said the growth was "driven by the acquisition of IPM and accelerating Assurance revenue growth through the second half of financial 2022."
IPM was acquired by NCC in June 2021 for USD220 million.
Energean on Monday said it has made a commercial gas discovery at its Athena exploration well, offshore Israel.
The FTSE 250-listed owns 100% of the well. It noted a gross hydrocarbon column of 156 metres was encountered in the primary target, with indications it holds recoverable gas volumes of 8 billion cubic metres of natural gas.
Chief Executive Mathios Rigas said: "We are delighted to announce this new gas discovery at Athena and the potential of the wider Olympus area. We are considering a range of strategic commercialisation options both for a standalone and wider Olympus area development, including domestic and multiple export routes."
Kosmos Energy had a "strong" first quarter, with a sharp jump in revenue coming from increased oil prices and production.
In the three months to March 31, Kosmos improved to a net income of USD1.4 million from a USD90.8 million loss a year prior.
Total revenue surged to USD659.1 million from USD176.6 million.
Oil & gas production expenses rose to USD124.7 million from USD45.8 million.
Chair & Chief Executive Andrew Inglis said: "Kosmos had a strong first quarter operationally and financially, with production at the top end of guidance and free cash flow of around USD220 million. We are continuing to invest in our differentiated portfolio which has the potential to grow production around 50% between 2022 and 2024 while increasing the gas weighting of our portfolio."
Total net production in the first quarter hit 72,600 barrels of oil equivalent per day.
"This production growth combined with a reduction in capital spending as these projects come online should allow Kosmos to generate material, sustainable cash flow for its shareholders," Inglis added.
Longboat Energy said it has farmed-in to two additional exploration prospects on the Norwegian Continental Shelf with Austrian oil and gas firm OMV for about USD12.4 million.
As part of the agreements, Longboat has acquired a 20% working interest in Oswig and Velocette. The wells are expected to be drilled in the summer of 2022 and the second quarter of 2023.
"The transaction seeks to build on Longboat's recent exploration success at Kveikje, Egyptian Vulture and Rodhette by adding two material wells, increasing its net un-risked mean resources by 45 million barrels of oil equivalent to 110 million barrels of oil equivalent across four firm exploration wells drilling in the next 12 months," Longboat added.
Earlier Monday, property firm Shaftesbury confirmed it is in advanced talks over a potential all-share merger with London and Johannesburg-listed Capital & Counties Properties.
The merger would create a real estate investment trust focused in the West End of London, holding a combined portfolio of 2.9 million square feet of lettable space located in Covent Garden and Chinatown.
Under the merger's terms, shareholders in Shaftesbury excluding Capco will own 53% of the combined firm, while Capco's own shareholders will have a 47% interest. Capco currently holds a 25% stake in Shaftesbury.
In the US on Friday, the Dow Jones Industrial Average closed down 0.3%, the S&P 500 down 0.4%, and Nasdaq Composite down 1.4%. Wall Street extended losses from a severe rout on Thursday, capping off a rocky week, with investors digesting central bank signalling.
The pound was quoted at USD1.2276 early Monday, down from USD1.2355 at the London equities close Friday.
The euro was priced at USD1.0510, lower against USD1.0576. Against the yen, the dollar was trading at JPY131.11, lower from JPY130.34.
A quiet economic calendar on Monday has eurozone Sentix investor confidence is at 0930 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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