(Alliance News) - The investment mood was downbeat in Europe on Monday morning with poor economic data out of China adding to a weak consumer confidence print in the US on Friday.
The FTSE 100 index was down 49.88 points, or 0.7%, at 7,168.83. The mid-cap FTSE 250 index was down 31.05 points, or 0.1%, at 23,757.17. The AIM All-Share index was down 0.2% at 1,263.91.
The Cboe UK 100 index was down 0.7% at 714.13. The Cboe 250 was down 0.2% at 21,590.41, and the Cboe Small Companies was 0.2% lower at 15,526.96.
In mainland Europe, the CAC 40 in Paris was 0.6% lower and DAX 30 in Frankfurt was down 0.3%.
"Normally I try to avoid discussing the previous day's economic indicators because that's by definition yesterday's news and I want to focus on today's news. But we can't explain where the market is today without mentioning the shocking disappointment of Friday's University of Michigan consumer sentiment survey. It was expected to be unchanged at 81.2; instead, it plunged to 70.2, which is not only below the April 2020 pandemic low of 71.8 but also the lowest since December 2011. This turnaround in sentiment created questions about the strength of the US economy going forward," said Marshall Gittler, head of Investment Research at BDSwiss.
"On top of which we have the debacle in Afghanistan and the spread of the Delta variant, and it's beginning to look like the plot of a summer disaster movie."
In London, the two oil majors got the session off to a rough start. Royal Dutch 'A' and 'B' shares were down 1.8%, while peer BP was 1.9% lower.
Brent oil was quoted at USD69.59 a barrel Monday morning, down from USD70.94 late Friday.
Oanda's Jeffrey Halley commented: "Oil prices tumbled on Friday after weaker [US] consumer confidence data, tracing another leg lower in Asia after China's data rose by far less than expected, triggering fears that its recovery is slowing. Virus fears also appear to be weighing on Asian sentiment in general, with markets casting a wary eye towards the evolution of the situation in China, particularly partial port closures."
Growth in China's retail sales and industrial production slowed in July, official data showed Monday, with a rebound of Covid-19 dragging on demand while recent floods disrupted businesses.
The world's second-largest economy staged a rapid recovery from last year's coronavirus outbreak, beating back the virus with mass testing and strict lockdowns. But a flare-up across the country due to the Delta variant has threatened the good news on growth with renewed localised lockdowns and extensive travel restrictions.
Retail sales rose 8.5% year-on-year in July, the National Bureau of Statistics said on Monday, below a Bloomberg consensus forecast of analysts. This figure was also below 12% growth in June, likely reflecting the virus resurgence in dozens of places last month, according to analysts.
"The spread of domestic outbreaks and natural disasters have affected the economy of some regions, and economic recovery remains unstable and uneven," NBS spokesman Fu Linghui told a press briefing on Monday.
Industrial production rose 6.4% in July, easing from the prior month's 8.3% growth, the NBS said.
Oanda's Halley added: "One must search hard for reasons to be cheery in Asia today. Indeed, that is how financial markets are feeling."
In Tokyo, the Nikkei 225 index closed 1.6% lower on Monday. In China, the Shanghai Composite ended up slightly, while the Hang Seng index in Hong Kong was down 0.9% in late trade. The S&P/ASX 200 in Sydney closed down 0.6%.
In more positive economic news, Japan's economy grew 0.3% in the three months to June, slightly more than expected, despite a surge in virus cases and new restrictions, data showed Monday.
The growth came after a contraction in the world's third-largest economy in the previous quarter, driven by a slowdown in consumption after the government introduced stay-at-home requests as infections surged.
Economists surveyed by Bloomberg had forecast just 0.1% quarter-on-quarter growth.
Against the yen, the dollar was trading at JPY109.31, down from JPY109.76.
Back in London, BHP was 0.4% lower after it confirmed, alongside Woodside Petroleum, that they are in talks with regarding the possible acquisition by Woodside of BHP's petroleum business.
"BHP confirms that we have initiated a strategic review of our Petroleum business to re-assess its position and long-term strategic fit in the BHP portfolio. A number of options are being evaluated. One option is a potential merger of the Petroleum business with Woodside Petroleum and a distribution of Woodside shares to BHP shareholders," BHP said.
The division is worth about USD14.7 billion, according to Bloomberg.
Perth-based Woodside, for its part, said it "continuously reviews the composition of its asset portfolio and opportunities to create and deliver value for shareholders".
"Woodside is engaged in discussions with BHP regarding a potential merger involving BHP's entire petroleum business through a distribution of Woodside shares to BHP shareholders," Woodside said.
Woodside closed 4.6% lower in Sydney on Monday.
Retirement firm Just Group shed 2.3% as it confirmed the sale of a GBP475 million portfolio of lifetime mortgages to Rothesay Life.
"This transaction enables the group to further reduce its exposure to UK residential property risk. As announced at the interim results, the sale of this portfolio of LTMs, including the remaining tranche, is expected to result in an improvement in the group's Solvency II capital coverage ratio by up to 1 percentage point and also reduce the sensitivity of that ratio to movements in UK residential property prices by over 1 percentage point," the company said.
The LTM assets being sold form part of the investments used to back the insurance liabilities of the group. Just Group will get GBP334 million from the deal, being settled in a mix of cash and gilts.
At the other end of the midcaps, Future PLC rose 5.2% after it confirmed it has acquired consumer media subscriptions business Dennis for about GBP300 million.
The media company said Dennis will be "materially earnings enhancing" and the deal will be funded from existing debt facilities.
As part of the acquisition, Future is acquiring the The Week, MoneyWeek, Kiplinger, Science & Nature, IT Pro, Computer Active, PC Pro, Minecraft World, and Coach. Whilst the current owners, Exponent Private Equity, will retain Viz, Fortean Times, Cyclist and Expert Reviews.
Dennis generated revenue of GBP104.8 million in 2020, a 12% rise on 2019.
Future Chief Executive Zillah Byng-Thorne said: "The materially earnings enhancing acquisition is highly complementary to our longstanding 'US first' mindset and provides an attractive opportunity to scale our recently created 'Wealth' vertical, whilst diversifying our presence in our 'Knowledge' and 'B2B Pro Technology' verticals."
The announcement confirmed a report by Sky News on Saturday.
Ultra Electronics gained 4.4% as it agreed to a takeover offer from former London-listing Cobham.
Cobham will pay GBP35.00 per share in cash for Ultra, valuing the London-based aerospace and defence engineering company at about GBP2.57 billion, which includes a 16.2 pence interim dividend declared earlier by Ultra.
Ultra closed at GBP31.52 each in London on Friday, and was trading at GBP33.00 early Monday.
The deal follows a number of earlier proposals, Ultra said, the first of which was made on June 29 at a price of GBP28.00 per share.
Cobham had said on June 25 that it was considering a combination with Ultra. Later that day, Ultra confirmed it had held early talks but said it had terminated discussions. On July 23, it confirmed it had received the GBP35.00 per share offer that the board has now accepted.
On Monday, Ultra said Cobham will give commitments to the UK government to win approval for the deal.
"Cobham recognises the specific importance of Ultra's contribution to the UK's economy and national security and therefore Cobham and Cobham Group Holdings have agreed with Ultra in the cooperation agreement that they will offer legally binding and enforceable commitments to HM government in respect of the Ultra group."
Aerospace contractor Cobham was a FTSE 250 company before it was bought by private equity firm Advent International in January 2020.
Gold was trading at USD1,776.30 an ounce early Monday, up against USD1,775.40 late Friday in London.
The pound was quoted at USD1.3861 early Monday, up from USD1.3859 at the London equities close Friday. The euro was priced at USD1.1790, lower from USD1.1795.
By Paul McGowan; paulmcgowan@alliancenews.com
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