LONDON MARKET CLOSE: Stocks edge lower as Evergrande fears mount

(Alliance News) - Stocks in London ended lower on Monday amid ongoing concerns over Evergrande Group and tapering from the US Federal Reserve.

The embattled Chinese property developer suspended trading in its shares in Hong Kong on Monday pending an announcement on a "major transaction", as the firm struggles in a sea of debt and faces a default.

The halt came as reports said Hong Kong real estate firm Hopson Development Holdings planned to buy a 51% stake in Evergrande's property services arm as the troubled giant tries to offload assets to meet its obligations.

Further, market participants are preparing for the US Federal Reserve to start tapering its massive bond-buying program before the end of the year.

The FTSE 100 index closed down 16.06 points, or 0.1%, at 7,011.01. The FTSE 250 ended down 320.85 points, or 1.4%, at 22,654.92 and the AIM All-Share closed down 10.07 points, or 0.8%, at 1,221.06.

The Cboe UK 100 ended down 0.1% at 696.90, the Cboe UK 250 closed down 1.3% at 20,534.20 and the Cboe Small Companies ended down 0.1% at 15,592.60.

In Paris the CAC 40 stock index ended down 0.9%, while the DAX 40 in Frankfurt ended down 0.8%.

"Markets are shaky as debt-riddled China Evergrande worries have resurfaced after shares were halted in Hong Kong on rumours of a big property unit sale. China's recovery is already slowing, worsened by soaring energy prices and power cuts crippling industrial output. Couple this with the potential collapse of Evergrande and reverberations across global financial markets, and that's why risk aversion is weighing," said analysts at Western Union.

In the FTSE 100, J Sainsbury ended the best performer, up 3.4%, following the takeover outcome of rival Wm Morrison Supermarkets over the weekend.

Morrisons closed down 3.7% at 285.90 pence, the second-worst blue-chip performer, while Tesco closed up 1.5%.

Clayton, Dubilier & Rice emerged victorious with a 287.00p per share bid, valuing Morrisons at almost GBP7 billion. The US firm beat out rival Fortress to the post, the Softbank-backed firm offering 286.00p per share.

The final offer for the supermarket, which last month was promoted back into the FTSE 100 index of London blue-chips, will now be voted on by shareholders on October 19. The takeover saga has dragged on since CD&R first made an approach for the Bradford-based grocer back in June, leading to speculation the sector was ripe for private equity takeovers.

"Tesco might be reporting this week but it is Sainsbury's that has stolen the limelight today on hopes that Morrison's spurned suitor will go shopping in other parts of the sector. As one of the more consistent performers this year the sector is clearly benefiting from further interest, although its likely that upcoming numbers from Tesco and its orange rival will reveal how much pressure the recent rise in costs is putting on the all-important profit margin," commented IG Group's Chris Beauchamp.

"Supermarkets have mostly been immune from September's volatility, but that might start to change this week," Beauchamp added.

Shares in oil majors BP, Royal Dutch Shell 'A' and 'B' closed up 1.9%, 1.5% and 1.5% respectively, tracking spot oil prices higher. FTSE 250-listed peer Harbour Energy was the best performer, up 5.4%.

Brent oil was quoted at USD81.85 a barrel at the equities close, up sharply from USD78.44 at the close Friday. The North Sea benchmark hit an intraday high of USD82 in afternoon trade - its highest level in three years.

OPEC and key allies - known as OPEC+ - decided to stick with their planned increase next month in oil production of 400,000 barrels despite worries that the high prices could dampen consumer demand.

At the other end of the large-caps, BT ended the worst performer, down 4.7%, on competition fears. Sky is nearing a deal to become an investor in Virgin Media O2's full fibre broadband roll-out, the Sunday Telegraph reported.

Sky is in talks about backing Virgin Media O2's plan to challenge the former state monopoly's dominance by upgrading 14 million homes and businesses to ultrafast broadband, the Telegraph reported. Rival Vodafone Group closed up 1.4%.

Compass Group ended down 2.7% after the contract caterer said Karen Witts will step down as chief financial officer and a company director on October 31. The decision was "mutually agreed" with the board, Compass noted. Commerical Director Palmer Brown will become CFO from November 1.

In the FTSE 250, Frasers Group ended the worst performer, down 6.9%, after Bank of America double-downgraded its rating on the Sports Direct and House of Fraser owner to Underperform from Buy.

The dollar was lower across the board. The pound was quoted at USD1.3605 at the London equities close, up from USD1.3550 at the close Friday.

The euro stood at USD1.1621 at the European equities close, up from USD1.1592 late Friday. Against the yen, the dollar was trading at JPY110.96, down from JPY111.06 late Friday.

Stocks in New York were sharply lower at the London equities close amid anxiety over inflation and uncertainty in Congress.

The DJIA was down 1.2%, the S&P 500 index down 1.6% and the Nasdaq Composite down 2.4%.

Worries about inflation remain prevalent following a series of company announcements in recent days about higher costs to ship goods and raw materials. Moreover, investors were focused on an unpredictable legislative environment for President Joe Biden's infrastructure and social spending program. Democrats have yet to coalesce around a compromise, while Republicans have signalled broad opposition to most of Biden's efforts.

On the corporate front, Facebook was down 5.1% with the social media company facing deepening scrutiny over its operations. Whistleblower Frances Haugen who revealed her identity on television news show "60 Minutes" said the company repeatedly chose "profit over safety" in managing the omnipresent platform.

Haugen will testify before a Senate subcommittee on Tuesday in a hearing titled "Protecting Kids Online," about the Facebook's research into Instagram's effect on young users.

Gold was quoted at USD1,764.50 an ounce at the London equities close, lower against USD1,757.98 late Friday.

The economic events calendar on Tuesday has services PMI readings from Germany at 0855 BST, the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST. Financial markets in Shanghai remain closed for National Day Golden Week.

The UK corporate calendar on Tuesday has third-quarter results from bakery chain Greggs and annual results from luxury confectionery retailer Hotel Chocolat.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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