LONDON MARKET CLOSE: Stocks fall as China retail sales slip in August

Wed, 15th Sep 2021 17:05

(Alliance News) - Stocks in London ended lower on Wednesday as investors digested disappointing Chinese economic data.

Growth in China's retail sales slowed to a 12-month low in August, data showed, as parts of the country were hit by lockdowns and other measures to fight the worst Covid outbreak since its initial spread in 2020. Retail sales grew 2.5% last month, well short of the 7% forecast and sharply down from the 8.5% witnessed in July.

The reading was the lowest since August 2020. Industrial production growth was also slightly below expectations and slower than the month before. The data comes after a string of figures indicating the recovery enjoyed last year and at the start of 2021 by the world's second largest economy was petering out.

The FTSE 100 index ended down 17.57 points, or 0.3%, at 7,016.49. The mid-cap FTSE 250 index closed down 254.45 points, or 1.1%, at 23,432.81. The AIM All-Share index lost 4.39 points, or 0.3%, to 1,273.56.

The Cboe UK 100 index ended flat at 699.70. The Cboe 250 ended down 1.0% at 21,238.10, and the Cboe Small Companies lost 0.1% to 15,475.20.

In Paris, the CAC 40 stock index ended 1.0%, while the DAX 30 in Frankfurt ended 0.7%.

Stocks in New York were higher at the London equities close. The DJIA was up 0.2%, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.1%.

CMC Markets analyst Michael Hewson said: "European markets have struggled again today with little in the way of direction, after a weak lead from Asia markets which fell back after Chinese retail sales dropped sharply to 2.5% in August, raising concerns that the world's second biggest economy is in much worse shape than was originally believed.

"With energy prices soaring across Europe, the economic outlook is starting to look increasingly uncertain, and while central banks are likely to take that into account, the fact remains that the rebound which was looking so solid a couple of months ago is starting to show signs of slowing markedly."

In the FTSE 100, oil majors ended among the best performer tracking spot oil prices higher. BP, Royal Dutch Shell 'A' and 'B' shares ended up 3.1%, 1.8% and 1.7% respectively.

Brent oil was quoted at USD75.75 a barrel at the London equities close, up sharply from USD73.74 at the close Tuesday.

"Oil prices are rising again on Wednesday, after data from API a day earlier showed a larger drawdown in inventories, once again drawing focus to today's report from EIA. A double whammy of the damaging impact of Hurricane Ida followed so quickly by Hurricane Nicholas slowly making its way across the region has weighed on activity in the Gulf which is also supporting prices," explained Oanda Markets analyst Craig Erlam.

At the other end of the large-caps, Just Eat Takeaway ended the worst performer, down 4.5%. Shares in the food delivery platform were lower after rival Deliveroo struck a deal which will see users of Amazon.com's Prime service in the UK and Ireland receive free food order deliveries.

Deliveroo will offer all users of Amazon Prime free access to the Deliveroo Plus services for one year, allowing for free delivery on orders over GBP25. Deliveroo ended down 1.1%.

British Airways parent International Consolidated Airlines finished down 3.5%, while jet engine maker Rolls-Royce lost 3.4%. The spike in oil prices prompts higher fuel prices, alongside the ongoing uncertainty over travel restrictions.

Fashion house Burberry, which has high exposure to China, closed 3.4% lower after the weak China retail sales data.

In the FTSE 250, Tullow Oil ended the best performer, up 5.4%, after the oil and gas firm raised its 2021 production guidance after swinging to a profit in the first half of the year.

The West Africa-focused oil and gas producer made USD727 million in revenue in the period, down 0.5% year-on-year from USD731 million. Tullow made a pretax profit of USD213 million, after a loss of USD1.44 billion a year ago.

The firm raised full-year production guidance, to between 58,000 and 61,000 boepd. The previous forecast, issued on July 14, was for between 55,000 and 61,000 boepd, and the upgrade reflects an acceleration of production at the Simba field in Gabon and the deferral of a planned shutdown of the Jubilee field in Ghana, Tullow said.

At the other end of the midcaps, Restaurant Group was the worst performer, down 11%. The Wagamama and Frankie & Benny's owner warned it is facing challenges from cost inflation, supply chain blockages, and the 'pingdemic' as it reported on Wednesday a dip in sales and a narrower loss in the first half of 2021.

Trustpilot Group ended down 6.6% after the Danish consumer reviews website posted a widened pretax loss in the first half.

In the six months ended June 30, revenue reached USD62.4 million, up 31% from USD47.7 million the previous year. However, in the same period the company's pretax loss widened to USD17.3 million from USD6.4 million a year ago as overheads rose.

On AIM, Fevertree Drinks closed up 9.9% after the tonic water maker maintained its full year guidance as revenue rose in the first half, despite profit remaining below its pre-pandemic level.

In the six months ended June 30, pretax profit increased 17% to GBP25.3 million from GBP21.7 million a year ago. In comparison. Before the pandemic, however, the company reported interim pretax profit of GBP34.8 million in 2019 and GBP32.7 million in 2018.

With sales increasing, the company reiterated its full-year guidance of between GBP295 million and GBP304 million with earnings before interest, tax, depreciation and amortisation of around 20%.

The pound was quoted at USD1.3840 at the London equities close, slightly lower from USD1.3845 at the close Tuesday.

On the economic front, the UK annual inflation rate jumped to 3.2% in August, accelerating from a rise of 2.0% in July. According to consensus cited by FXStreet, a smaller increase to 2.9% was expected.

"The increase of 1.2 percentage points is the largest ever recorded increase in the CPI National Statistic 12-month inflation rate series, which began in January 1997," the Office for National Statistics said.

On a monthly basis, the UK consumer price index rose 0.7% in August, having been flat in July.

On the political front, UK Prime Minister Boris Johnson on Wednesday appointed a new-look cabinet to revamp his Brexiteer government after controversies over Covid, Afghanistan and taxes, demoting his under-fire foreign minister Dominic Raab.

Raab took over as justice secretary but will retain the role of deputy prime minister, Downing Street confirmed.

The former lawyer, who deputised for Johnson when he was in intensive care with Covid-19 in April last year, has faced sustained criticism for his handling of the Afghan crisis. Raab was replaced by Trade Secretary Liz Truss, who has brokered a series of deals since Britain's full exit from the EU in January.

Truss, a rising star within the Conservative Party ranks, became only the second female foreign secretary in British history having secured new trade terms with Japan and Australia.

Among the other leading offices of state, Chancellor of the Exchequer Rishi Sunak - who has overseen big-spending economic support during the pandemic - and hardline Home Secretary Priti Patel both retained their roles.

Gaffe-prone Education Secretary Gavin Williamson was the first minister to indicate he was out of a job, tweeting that it had been a "privilege" to serve in his role since 2019 when Johnson took office on a vow to "get Brexit done".

Johnson enjoyed a "vaccine bounce" after Britain led the Western world in a mass immunisation programme, but the Conservatives' lead over the main opposition Labour party has eroded in recent opinion polls.

The euro stood at USD1.1817 at the European equities close, marginally lower from USD1.1821 late Tuesday. Against the yen, the dollar was trading at JPY109.38, down from JPY109.65 late Tuesday.

Gold was quoted at USD1,792.85 an ounce at the London equities close, lower against USD1,807.10 late Tuesday.

The economic events calendar on Thursday has eurozone trade figures at 1000 BST and US retail sales numbers at 1330 BST.

The UK corporate calendar on Thursday has first-quarter results from equipment rental firm Ashtead Group and a trading statement from online trading company IG Group. There are also annual results from construction firm Galliford Try and interim results from DIY retailer Wickes Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com