LONDON MARKET CLOSE: Rising US, China Tensions Rattle Stocks

(Alliance News) - Stock prices in London closed lower on Thursday as fear that rising tensions between the US and China would scupper any trade rapprochement between the two largest global economies.

The FTSE 100 index closed down 1.1% at 7,248.38 Thursday. The mid-cap FTSE 250 index closed down 0.5% at 20,021.50. The AIM All-Share index closed marginally lower at 889.54.

The Cboe UK 100 closed down 0.9% at 12,325.17, the Cboe UK 250 down 0.2% at 18,016.06, and the Cboe UK Small Companies down 0.3% at 11,190.69.

The pound was quoted at USD1.2927 at the London close, lower from USD1.2866 late Wednesday.

"The broadly positive post-FOMC atmosphere has been dented by reports from the newswires regarding everyone's favourite topic (apart from Brexit), trade wars," IG Chief Market Analyst Chris Beauchamp said.

Late Wednesday, the Federal Open Market Committee of the US Federal Reserve cut its benchmark interest rates again amid the "implications of global developments for the economic outlook as well as muted inflation pressures."

The FOMC set the treasury yield range to between 1.50% and 1.75%, down from the 1.75% to 2.00% range prior.

"It should come as no surprise, but China appears not to trust Donald Trump over the putative trade deal," Beauchamp added. "Coming off the back of a substantial run-up in equities, such news would be the almost perfect cue for a pullback, even if of only brief duration."

Late Wednesday, US Secretary of State Mike Pompeo described China as "truly hostile" to the US and vowed to increase pressure on China along multiple fronts.

In response, Beijing said Pompeo had "viciously attacked" China through his "deliberate distortion of the facts and slandering of China's domestic and foreign policies."

"It is possible too that a revival of trade wars upends the Fed's thesis from last night's meeting, and pushes the Fed towards more action in December," Beauchamp continued.

Despite the interest rate move by the Fed - the third successive time it had cut rates - the central bank pointed to a "strong" labour market and expected "sustained" economic growth. Nonetheless, the Fed warned of the "uncertainties" around this outlook.

On Wall Street, the Dow Jones was trading 0.7% lower, the S&P 500 down 0.6%, whilst the Nasdaq was down 0.3%.

Amongst the blue chips moving in London, oil majors and miners closed sharply lower as fears of a further escalation in the US-China trade war and its impact on global growth sent commodity prices lower.

Mining firms Glencore, Antofagasta and Rio Tinto ending 1.9%, 1.7% and 0.9% lower.

Oil majors were also under pressure after a weak update from Royal Dutch Shell, sending its shares 4.1% lower, compounded with trade fear pressure on the oil price. Fellow major oil firm BP closed down 2.0%.

For the three months ended September, CCS earnings - the preferred profit metric for Shell - ended 15% lower at USD4.92 billion.

Brent oil was quoted at USD60.22 a barrel at the London equities close, lower than USD60.91 at the close Wednesday.

Meanwhile, with trade angst sending gold prices higher, gold miners were in the green with Fresnillo ending Thursday at the top of the index, up 3.2%.

Gold was quoted at USD1,510.25 an ounce at the London equities close, higher versus USD1,493.92 Wednesday.

FTSE 100-listed medical devices maker Smith & Nephew closed 3.9% lower after warning on margins despite lifting it annual revenue guidance for the second time in 2019 amid a "sustained improved performance."

For the three months ended September, revenue rose 6.5% on the year prior to USD1.25 billion. Despite this, Smith & Nephew cautioned trading margins would be at the lower end of its 22.8% to 23.2% range.

"This reflects our decision to continue to invest in opportunities to support medium-term growth, dilution from the acquisitions, and a small foreign exchange headwind in the second half of 2019," Smith & Nephew said in a statement.

In the green amongst the blue chips, British Airways-owner International Consolidated Airlines Group closed 2.2% higher after reporting "good underlying results" in the third quarter despite profit being held back by a recent pilot strike at the UK flag carrier.

For the three months ended September, pretax profit fell 8.7% on the year prior to EUR1.26 billion despite revenue rising 2.4% on the year before to EUR7.31 billion.

Telecommunications firm BT Group ended 1.8% higher after first half results were in line with its expectations, leading to the blue chip company holding firm on its full year expectations and its interim dividend.

For the six months ended September, pretax profit dipped 0.5% on the year prior to GBP1.33 billion after revenue fell to GBP11.47 billion.

BT held its interim dividend at 4.62 pence.

In the FTSE 250, publishing firm Future closed 12% higher at 1,520 pence after it raised GBP104 million through a discounted share placing in order to help fund its GBP140 million acquisition of Decanter, Country Life and Horse & Hound magazines publisher TI Media.

On Wednesday, Future proposed to buy TI in order to "bolster its growth levers." On Thursday, Future placed 8.2 million shares at 1,275 pence each - a 6.3% discount to its share price on Wednesday.

At the other end of the mid caps, housebuilder Crest Nicholson ended 5.1% lower after warning full year profit was expected to be lower than the year prior amid "volatile" market conditions in the UK.

Crest Nicholson now expects pretax profit to be between GBP110 million and GBP120 million, down from GBP176.4 million the year prior.

Elsewhere in London, AIM-listed technical training aids maker Pennant International closed 9.4% higher on securing a "major" GBP3.4 million multi-year contract to develop a helicopter maintenance training aid and reporting revenue will soon be coming from its Qatar deals.

AIM-listed narrowband radio frequency mesh networks developer CyanConnode Holdings ended 38% lower on warning that it is "unlikely" to meet market expectations for 2019 amid delays to securing "significant" Indian contracts.

In September, CyanConnode expected to secure "substantial Indian contracts" by the end of October after delays to new tenders caused by the general election in the country.

The award of these continues, however, is to take longer than expected with the company now unlikely to meet market expectations for 2019.

In mainland Europe, in Paris the CAC 40 equities index ended down 0.6%, while the DAX 30 in Frankfurt ended down 0.3%.

The euro was quoted at USD1.1151, higher compared to USD1.1122 late Wednesday. The dollar was trading at JPY108.09, lower compared to JPY108.87 late Wednesday.

In the economic calendar on Friday, Japanese and Chinese manufacturing PMI figures are released at 0030 GMT and 0145 GMT respectively.

Manufacturing PMI prints are also expected from the UK at 0930 GMT and the US at 1345 GMT. Elsewhere in the US, nonfarm payrolls data are released at 1230 GMT and US oil rig counts figures at 1700 GMT.

In UK corporate events on Friday, third quarter results are expected from steelmaker Evraz and trading broker TP ICAP. A trading update is anticipated from oil & gas firm Genel Energy.

By Ahren Lester; ahrenlester@alliancenews.com

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