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(Alliance News) - European equities were lower early Thursday, with blue-chip stocks in London being hit by a tough sell-off in early dealings, before gathering some poise, though only a handful of the FTSE 100 was in the green.
Sentiment in global markets has soured ahead of the European Central Bank's latest monetary policy decision. Nerves ahead of the ECB's update as well as fears that a levy hike by the UK government could hit consumer spending saw stocks tumble in a uniformly negative start to proceedings on Thursday.
The FTSE 100 index was down 55.89 points, 0.8%, at 7,039.64. It was down 1.3% shortly after the opening bell.
The mid-cap FTSE 250 index was down 110.20 points, 0.5%, at 23,738.69. The AIM All-Share index was down 4.50 points, 0.4%, at 1,296.16.
The Cboe UK 100 index was down 1.0% at 699.54. The Cboe 250 was down 0.6% at 21,496.71, and the Cboe Small Companies was down 0.3% at 15,446.76.
In mainland Europe, the CAC 40 stock index in Paris was down 0.4% and the DAX 30 in Frankfurt lost 0.7%.
In the FTSE 100, B&M European, up 0.9% after extending gains following Wednesday's outlook raise, was the best performer among only a select few in the green.
Fears that the UK government hike on national insurance would hit consumer spending carried into the early stages of Thursday's session, after denting the mood on Wednesday.
British Airways parent International Consolidated Airlines Group was down 3.4%. Retailer Next fell 1.4%, while other cyclical stocks like banks and oil producers were also lower.
BP fell 1.2%, while Barclays was down 1.5%.
"The European Central Bank is expected to maintain its rates unchanged at today's meeting, and at many more meetings to come, but they are expected to start talking about tapering their bond purchases. And the potential taper talk doesn't necessarily please investors, as the Covid situation remains uncertain and European businesses need the ECB's support to go through what might be another dark winter," Swissquote analyst Ipek Ozkardeskaya commented.
"One of the reasons why the ECB hawks are coming back in charge is the rising inflation... Today's meeting will give away some insight about how the ECB will cope with the rising inflation and the stressed hawkish members, what the dovish-hawkish balance will look like and where the euro should be headed next. The chances are we will see President Christine Lagarde soothing the doves' nerves at today's press conference – which should trigger some weakness in euro versus the greenback in the short run."
The ECB Governing Council meets in Frankfurt, announcing its latest policy decision at 1245 BST. This will be followed by a press conference with President Christine Lagarde at 1330 BST.
Ahead of the ECB monetary policy decision, the euro was in better shape against the dollar. The single currency fetched USD1.1822 on Thursday morning London time, from USD1.1815 at the European equities close on Wednesday.
The pound was quoted at USD1.3777 early Thursday in London, up from USD1.3745 late Wednesday. Against the yen, the dollar was trading at JPY109.96, down from JPY110.40.
Back in London, easyJet was down 11%. The budget airline said it is planning to raise GBP1.2 billion in a fully underwritten rights issue in order to emerge from the pandemic on the front foot.
easyJet added it recently rejected an unsolicited preliminary takeover approach. The bidder has since confirmed it is no longer eyeing the company.
"The indicative proposal took the form of a low premium and highly conditional all-share transaction which, in the board's view, fundamentally undervalued the company," said easyJet.
Alongside the issue, it has secured new bank financing commitments to boost liquidity. It has agreed a new four-year senior secured revolving credit facility of USD400 million.
easyJet said UK domestic capacity in August was more than double pre-pandemic levels, while intra-EU capacity was at 81%.
It expects capacity in the fourth quarter to strengthen to 57% of pre-virus numbers, compared to just 17% in the third quarter, and sees first quarter passengers at up to 60% of pre-pandemic levels.
Genus fell 9.0%, the next worst mid-cap performer. It saw earnings rise in the first half of 2021, but the biotechnology products provider for cattle and pig farmers tips volatility ahead.
Revenue in the six months to June 30 rose 4.2% to GBP574.3 million from GBP551.4 million a year earlier. Pretax profit was up 21% to GBP55.8 million from GBP46.3 million.
Genus lifted its payout by 10% to 32.0p per share from 29.1p.
"Genus performed very strongly and made significant strategic progress in the 2021 fiscal year. The group continued to show its resilience during the Covid-19 pandemic and I would like to thank our people who have shown great dedication to our customers whilst navigating the many challenges that the pandemic has caused," Chief Executive Stephen Wilson added.
However, Wilson warned "recent volatility in the Chinese porcine market" will only get worse.
"As a result of this headwind, and despite an expected strong performance in the other areas of the business, we expect Genus's growth to be lower than our medium-term goal in the current year before increasing again in FY23," Wilson added.
Grocer Wm Morrison Supermarkets inched up 0.1% to 292.70p.
It said its pretax profit in six months to August 1 fell 43% to GBP82 million from GBP145 million a year earlier. Pretax profit before exceptional items and adjusted for business rates relief a year earlier was higher, however, up 42% to GBP105 million and GBP74 million. Morrisons had GBP93 million in rates relief waived in the same period a year earlier.
Total revenue, including fuel sales, rose 3.7% annually to GBP9.05 billion from GBP8.73 billion. Total sales excluding fuel were largely unchanged year-on-year at GBP7.55 billion.
Like-for-like sales excluding fuel are 8.4% higher than they were two years earlier, but down 0.3% annually. In the second quarter alone, like-for-like sales dropped 3.7%, compared to a rise of 2.7% in the first three months of the financial year.
"Across the business the whole Morrisons team has shown commendable resilience facing into a variety of continuing challenges during the first half, including the ongoing pandemic, disruption at some of our partner suppliers, and the impact on our supply chain of HGV driver shortages. As we approach our busiest time of year, I'm confident the team will continue to rise to all challenges and keep up all the good work to improve the shopping trip for customers," Chair Andrew Higginson said.
Direct Covid-19 costs fell to GBP41 million from GBP155 million.
Morrisons added: "In addition, with the majority of our cafés closed until mid-May, and our fuel and food-to-go volume recovering gradually throughout the first half of 2021/22, we incurred considerable lost profit of GBP80 million in these key areas of our business compared to a pre-Covid-19 year such as 2019/20."
The company, which paid a 2.04 pence payout a year earlier, decided against a dividend due to it being under offer. The company is recommending Clayton, Dublier & Rice's latest 285p per share offer.
Brewin Dolphin analyst John Moore commented: "The Morrisons board recommending the 285p per share offer from CD&R should bring a conclusion to the bidding war for the supermarket, which has highlighted the appetite from private equity and trade investors for comparatively cheap UK companies over the last 12 months. It has also underlined the old investment adage about 'buying on the first bid', with Morrisons' share price increasing significantly since the initial offer was made public.
"The new potential owners will be pleased to see that Morrisons is in relatively robust shape, as it continues to recover from the effects of Covid-19. Revenues have increased, as has free cash flow, helping to edge down debt. While profits are markedly lower, this can largely be put down to exceptional items and Covid-19 costs. There are other concerns in the shape of supply chain challenges, but the more integrated approach of Morrisons should see it better placed than many facing these uncertainties."
Elsewhere in London, small business lender Funding Circle rose 5.3% as earnings improved markedly in the first six months of 2021.
Total income was 19% higher at GBP120.6 million from GBP101.2 million a year earlier. Funding Circle swung to a pretax profit of GBP35.4 million from a GBP115.1 million loss.
Including fair value gains of GBP8.1 million, following last year's GBP96.1 million hit, net income surged to GBP128.7 million from GBP5.1 million.
Funding Circle added that its loans under management hit a record GBP4.93 billion, up by a third from GBP3.72 billion a year earlier.
Brent oil was quoted at USD72.52 a barrel, up from USD72.35. Gold fetched USD1,791.23 an ounce, down slightly from USD1,791.85.
In Asia on Thursday, Tokyo's Nikkei 225 finally relented after nine positive sessions on-the-trot, closing down 0.6%. The S&P/ASX 200 ended down 1.9%. In China, the Shanghai Composite ended up 0.5%, while the Hang Seng Index was 2.1% lower.
Chinese authorities have ordered gaming giants Tencent and NetEase to end their focus on profits and cut content perceived to be breeding "effeminacy", as Beijing tries to direct youth culture, gender ideals and the reach of big tech.
Tencent and NetEase shares were down 6.1% and 8.2% in Hong Kong.
The move is the latest by authorities to tighten their grip on the embattled technology sector and sent shares in some of the industry's biggest names plunging.
Officials on Wednesday summoned gaming enterprises including Tencent and NetEase, the two market leaders in China's multi-billion-dollar gaming scene, to discuss further curbs on the industry, which has already been ordered to limit gaming time to three hours a week.
"Another day, another intervention by the Chinese government. I remain concerned that buying the dip in China equities is a dangerous business at the moment," Oanda analyst Jeffrey Halley summarised.
By Eric Cunha; ericcunha@alliancenews.com
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