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(Alliance News) - Stocks in London were called lower on Tuesday after China reported slower-than-expected growth in factory output and retail sales for October, as a surge in Covid cases and a deepening property slump weighs on the world's second-largest economy.
Retail sales in China were down 0.5% in October from a year earlier, contracting for the first time since May, according to data released by the National Bureau of Statistics.
The figure was below a 0.7% increase expected by Bloomberg analysts and September's 2.5% expansion.
Industrial output grew 5.0%, less than the 5.3% growth forecast and well below the 6.3% gain in September.
The data was released as China President Xi Jinping on Tuesday asked the G20 wealthy nations to contain the fallout from interest rate hikes.
"We must contain global inflation and resolve systematic risks in the economy and finance," Xi told a summit of the 20 major economies taking place in Bali, Indonesia. "Developed economies should reduce the negative spillover effects of their monetary policy adjustments and stabilise debts at a sustainable level," he said.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called down 3.57 points at 7,381.60
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Hang Seng: up 3.9% at 18,304.71
Nikkei 225: closed up 0.1% at 27,990.17
S&P/ASX 200: closed down 0.1% at 7,141.60
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DJIA: closed down 211.16 points, 0.6%, at 33,536.70
S&P 500: closed down 0.9% at 3,957.25
Nasdaq Composite: closed down 1.1% at 11,196.22
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EUR: up at USD1.0400 (USD1.0334)
GBP: up at USD1.1821 (USD1.1714)
USD: down at JPY139.31 (JPY140.45)
Gold: up at USD1,782.50 per ounce (USD1,758.52)
Oil (Brent): down at USD93.07 a barrel (USD94.44)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
11:00 CET EU foreign trade
11:00 CET EU latest growth figures
11:00 CET EU flash estimate employment
11:00 CET Germany ZEW economic sentiment indicator
11:00 GMT Ireland export and import
08:00 EST US Fed Philadelphia President Patrick Harker speaks
08:30 EST US producer price index
08:55 EST US Johnson Redbook retail sales index
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UK unemployment edged higher in the three months to September as the country heads for what is feared will be the longest recession in a century. The jobless rate stood at 3.6% in the three months to September, up from 3.5% in the three months to August, the Office for National Statistics said. It came as more people dropped out of the workforce, with a hike in the proportion of people neither looking for work nor working. Over half a million working days were lost to strikes in August and September – the highest two-month total in more than a decade – the ONS also revealed. Wage rises continued to be far outstripped by rocketing inflation, with average earnings with bonuses stripped out down 3.8% when compared with the consumer price index.
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UK Prime Minister Rishi Sunak said China poses a systemic challenge to UK values and represents the "biggest state-based threat to our economic security". The prime minister is attending the G20 summit in Bali with fellow leaders of the world's major economies, including China's Xi Jinping. Britain would consider sending arms to help Taiwan to defend itself in the event of an attack from Beijing, Sunak said. He told reporters travelling with him to Indonesia: "My view is that China poses a systemic challenge to our values and interests and it represents the biggest state-based threat to our economic security. "I think that view, by the way, is highly aligned with our allies." The prime minister said it was "important" the UK defends itself against that, for example through the National Security Investment Act, which allows the government to block investment in UK companies that might affect the country's security.
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Russia faced mounting diplomatic pressure to end its war in Ukraine, as G20 leaders meeting in Indonesia rued the high cost of the eight-month-old conflict. In a draft communique, countries including Russia deplored the impact of "the war in Ukraine" – a conflict that "most members strongly condemned". The group is also expected to declare that "the use or threat of use of nuclear weapons" is "inadmissible", a veiled rebuke of President Vladimir Putin who has repeatedly raised the spectre of nuclear conflagration. Putin was forced to skip the summit as he reckons with a string of embarrassing battlefield defeats and a grinding war that threatens the future of his regime.
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BROKER RATING CHANGES
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RBC raises B&M European Value Retail price target to 400 (360) pence - 'sector perform'
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Jefferies cuts Aston Martin to 'underperform' ('hold) - price target 120 (530) pence
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Jefferies cuts ITM Power to 'hold' ('buy') - price target 105 (185) pence
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COMPANIES - FTSE 100
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Vodafone reported a "resilient" interim performance despite a "challenging" macroeconomic environment but nonetheless lowered its full-year guidance. In the six months that ended September 30, the telecommunications firm posted pretax profit of EUR1.73 billion, up from EUR1.28 billion the previous year. Revenue climbed to EUR22.93 billion from EUR22.49 billion, driven by higher service revenue and higher equipment sales. Chief Executive Nick Read said the firm was taking a number of steps to mitigate the "economic backdrop of higher energy costs and rising inflation". This included pricing action in Europe, he said, as well as a new cost saving target of EUR1 billion or more. Vodafone also lowered its full-year outlook for adjusted earnings before interest, tax, depreciation, and amortization and special losses to between EUR15.0 billion and EUR15.2 billion. Previously, it had guided between EUR15.0 billion and EUR15.5 billion.
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Imperial Brands saw its profit and revenue fall in the financial year that ended September 30, as the Bristol, England-based tobacco firm was hit by charges related to its exit from Russia and associated markets. In the year, pretax profit dropped to GBP2.55 billion from GBP3.24 billion the previous year. Revenue fell more modestly, edging down to GBP32.55 billion from GBP32.79 billion a year before. Imperial explained this decrease in revenue was primarily driven by a weaker euro, though tobacco volumes also declined by 4.7% against the previous year. Looking ahead, Imperial said it continues to expect low single-digit constant currency net revenue growth over the next three years. It added that performance in its new financial year will be weighted to the second half due to the phasing of next-generation product investment, the impact of its Russian exit, and the continued unwind of Covid-19.
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COMPANIES - FTSE 250
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Workspace boasted a strong interim performance as the office space provider reported a surge in half-year profit and revenue. In the six months ended September 30, pretax profit multiplied to GBP35.8 million from GBP3.4 million the previous year, as revenue climbed to GBP82.3 million from GBP61.2 million. Net rental income rose to GBP56.1 million from GBP41.0 million. Workspace cited continued customer demand and a rapid recovery from Covid-19 for the strength of its performance. It declared an interim dividend of 8.4 pence, up 20% from 7.0p the prior year. In regard to its second half, Workspace said it has seen "stable like-for-like occupancy and continued rental growth driven by good levels of customer demand".
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OTHER COMPANIES
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Wincanton said it remains on track to deliver full-year profit in-line with market expectations as it reported interim revenue growth across all its sectors. In the six months that ended September 30, the UK business supply chain operator posted a pretax profit of GBP25.8 million, up from GBP25.1 million the previous year, while revenue jumped to GBP753.6 million from GBP690.3 million. This was thanks to good new business momentum, with contract renewals and extension won during the period with the likes of IKEA Dartford, the firm explained. Wincanton added that it was successfully managing inflationary pressures, saying it has "clear mechanisms" to pass through costs in open-book contracts and added that "proactive actions" are being taken to manage closed-book contracts.
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By Heather Rydings; heatherrydings@alliancenews.com
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