(Alliance News) - The FTSE 100 looks set to start the new trading week on the back foot, following less than stellar data in China on Monday that showed the fallout from the country's zero-Covid policy.
In early corporate news in London, Ryanair reported a narrowed annual net loss. National Express refused to budge on its takeover offer for Stagecoach. Plus500 expects strong revenue growth.
IG futures indicate the FTSE 100 index will open down 70.65 points, or 0.4%, at 7,388.50 in London on Monday. The blue-chip index closed up 184.81 points, or 2.6%, at 7,418.15.
"The big test for markets in Europe this week will be whether we can hold onto the gains we saw on Thursday and Friday, given that central banks are in tightening mode, and this week's economic data is unlikely to show much in the way of improvement in the short to medium term," CMC Markets analyst Michael Hewson said.
"This morning’s April retail sales and industrial production data from China are a case in point. Last week the April trade numbers showed a sharp fall in both imports and exports as transportation difficulties and port stoppages impacted the flow of goods and services, pointing to the significant disruption caused by China's current Covid policies."
Industrial production fell by 2.9% year-on-year in April, reflecting damage from shuttered factories and transportation woes as officials ramped up Covid restrictions last month. This figure is the weakest since early 2020, and represents a swing from 5.0% growth in March.
The dismal showing came as China battles its worst Covid outbreak since the early days of the pandemic.
The National Bureau of Statistics also announced data showing that retail sales shrank 11% on-year in April.
It is the biggest slump since March 2020 as Chinese consumers remained cooped up at home or jittery over lingering restrictions.
CMC's Hewson added: "The poor nature of these numbers, along with the probability of how much improvement can be expected given China's zero-Covid policy Asia markets have seen a mixed start to the week, which looks set to translate into a lower open for markets here in Europe. "
In Asia on Monday, the Japanese Nikkei 225 index closed up 0.5%. In China, the Shanghai Composite was 0.4% lower, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Sydney ended up 0.3%.
Brent oil was quoted at USD110.00 a barrel Monday morning, lower from USD111.00 late Friday. Gold stood at USD1,807.10 an ounce, down significantly against USD1,940.80.
AvaTrade analyst Naeem Aslam said: "Oil prices are moving lower to begin the week as the general sentiment in the market isn't supporting oil demand. Investors are more worried about the strong possibility of a recession taking place in the biggest economy in the world, the US. Even if we hit a technical recession where the GDP growth shows contraction for a very brief period, it would only adversely influence oil demand."
In London, Dublin-based low-cost airline Ryanair reported a narrowed annual net loss of EUR355 million, cut from EUR1.02 billion, as revenue multiplied to EUR4.80 billion from EUR1.64 billion.
"This recovery, however, remains fragile" following Russia's invasion of Ukraine, Chief Executive Michael O'Leary said in a statement.
"Given the continuing risk of adverse news flows on" Ukraine and Covid, "it is impractical – if not impossible – to provide a sensible or accurate profit guidance range at this time," he added.
While Ryanair expects cost increases as a result of surging oil prices fuelled by the war, it hopes "to return to reasonable profitability" in its current financial year.
It forecast passenger traffic of 165 million in its current year, compared with a pre-pandemic level of 149 million.
The airline carried more than 97 million passengers last year compared with 27.5 million during the previous 12 months period when the pandemic struck.
High-street bakery chain Greggs said it has "traded well" in the first 19 weeks of 2022.
Like-for-like sales in company-managed shops surged 27%, a figure which the firm noted is "flattered" by comparison with restricted trading conditions in the same period of 2021.
"Since we last reported, like-for-like sales growth in the most recent ten weeks to 14 May, when lockdowns in 2021 were easing, has averaged 16% and we expect this figure to continue to normalise as we start to compare with more robust trading periods in 2021," Greggs added.
Greggs noted that sales in cities and office locations "continue to lag" but transport locations seen a "marked increase".
Total sales in the 19 weeks to May 14 increased to GBP495 million from GBP378 million.
Diploma on Monday said it was "delighted" with its performance in the first half, with sales surging.
The London-based specialised technical products and services company said its revenue growth was driven by positive demand and pricing.
In the six months to March 31, revenue was up 23% to GBP448.5 million from GBP365.2 million, and pretax profit up 23% to GBP52.3 million from GBP42.5 million.
Diploma upped its interim dividend by 20% to 15.0 pence from 12.5p.
"We are not complacent about the economic outlook, but the second half has started really well and we are confident in our upgraded full year guidance," Chief Executive Johnny Thomson said.
Diploma is guiding for low double digit underlying revenue growth, and reported revenue growth of a "little over" 20%.
National Express confirmed it will not raise the offer for public transport peer Stagecoach that it made in March.
National Express said it believes its all-share combination with Stagecoach remains the better choice after being spurned for a cash offer from DWS Infrastructure.
In a statement on Monday, National Express said: "The National Express board notes that the proposed exchange ratio represents a current value of 90p per Stagecoach share - based on the latest National Express share price as at May 13 2022 - and an illustrative look-through value of approximately 113p per Stagecoach share, a 7% premium to the DWS offer.
"National Express therefore considers the terms of its proposal to be full and fair and has decided that the terms will not be increased and are now final."
Stagecoach walked away from the all-share merger with larger UK peer National Express, opting instead for a GBP594.9 million cash offer from Pan-European Infrastructure III SCSp, an infrastructure fund managed and advised by DWS Infrastructure.
On Monday, DWS noted it has secured 30.4% acceptances for its takeover, which is unchanged from recent updates.
National Express continues to urge Stagecoach shareholders to take no action in relation to the DWS bid.
Online trading platform Plus500 said trading in the second quarter has been "very strong".
As a result, it expects annual earnings and revenue will be "significantly ahead of current market expectations".
In 2021, Plus500 posted pretax profit of USD386.4 million on revenue of USD718.7 million.
"The group's strong performance so far in 2022 has also been driven by the development of new proprietary technologies and product offerings, which will deliver growth and drive expansion and diversification across new geographies," Plus500 added.
In the US on Friday, equities ended sharply higher on reduced fear about aggressive interest rate rises in the US following well-received comments from Federal Reserve Chair Jerome Powell.
The Dow Jones Industrial Average closed up 1.5%, the S&P 500 up 2.4%, and the Nasdaq Composite up 3.8%.
The pound was quoted at USD1.2243 early Monday, higher from USD1.2230 at the London equities close on Friday.
The euro was priced at USD1.0405, soft against USD1.0410. On Friday, the common currency for the euro area sank to an intraday low of USD1.0350 against the greenback, its lowest level since January 2017.
Against the yen, the dollar was trading at JPY129.04 early Monday in London, soft from JPY129.28 late Friday.
A quiet economic events calendar on Monday has eurozone foreign trade at 1000 BST.
By Paul McGowan; paulmcgowan@alliancenews.com
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