LONDON MARKET CLOSE: Stocks slip as Chinese growth data disappoints

(Alliance News) - Stocks in London closed in the red on Monday, with the FTSE 100 weighed down as growth data for the world's second-largest economy fell short of expectations.

Nerves were also beginning to build ahead of key UK inflation data due out on Wednesday, with James Smith at ING suggesting the data would be "make-or-break" for the Bank of England's next interest rate decision.

The FTSE 100 index closed down 28.15 points, or 0.4% at 7,406.42 on Monday. The FTSE 250 ended down 162.38 points, or 0.9%, at 18,404.43. The AIM All-Share closed down 0.39 of a point, or 0.1%, at 750.39.

The Cboe UK 100 ended down 0.4% at 739.15, the Cboe UK 250 closed down 0.8% at 16,161.95, and the Cboe Small Companies ended down 0.4% at 12,941.87.

The pound was quoted at USD1.3080 at the London equities close on Monday, down from USD1.3117 at the close on Friday.

"Pound traders' focus will turn to inflation data come Wednesday after we had higher-than-expected rise in wages last week. The Bank of England will mostly likely hike rates further at its next meeting on 3 August. The size of the rate increase could well be determined by the upcoming inflation data," suggested Fawad Razaqzada, market analyst at City Index and Forex.com.

The Bank of England will announce its next interest rate decision on August 3. According to FXStreet-cited consensus, headline inflation in the UK is expected to cool to 8.2% on an annual basis in June, from 8.7% in May.

UK Prime Minister Rishi Sunak acknowledged on Monday that inflation is not coming down as quickly as he would like.

Sunak has made halving consumer prices index inflation to around 5.3% by the end of the year one of his key priorities. He said on Monday progress is being made to bring price rises under control but high inflation is proving more persistent than expected.

However, before the BoE's interest rate decision, the US Federal Reserve and the European Central Bank will reveal their own respective monetary policy decisions.

The Fed will announce its next interest rate decision next Wednesday. Markets are expecting the central bank to lift interest rates by 25 basis points, according to the CME FedWatch Tool.

The European Central Bank will announce its own interest rate decision the day after the Fed.

On Thursday, minutes from the ECB's last meeting showed that the central bank wanted to make it clear that there was still more to do in the fight against inflation.

The euro stood at USD1.1231, down from USD1.1240 on Friday. Against the yen, the dollar was trading at JPY139.11 at the close on Monday, up from JPY138.55 late Friday.

In London, miners were among the worst-performing stocks in the FTSE 100 after fresh economic data from China disappointed.

Glencore, Rio Tinto, Anglo American and Antofagasta were down 2.8%, 2.2%, 2.2%, and 1.9%, respectively.

"China is a major consumer of commodities and disappointing economic indicators typically drive down shares in miners and oil companies for fear that demand for metals, minerals and energy products will be lower than previously hoped," explained Danni Hewson, head of financial analysis at AJ Bell.

China's economy grew 6.3% year-on-year in the second quarter, data showed, but the figure belies the country's slowing post-pandemic recovery.

In quarter-on-quarter terms – considered a more realistic basis for comparison – Monday's data showed the world's second-largest economy only grew 0.8% in April through June. That is down from the 2.2% growth seen from January through March, after lukewarm activity from October to December last year.

Brent oil was quoted at USD79.11 a barrel at the London equities close on Monday, down from USD80.12 late Friday. Gold was quoted at USD1,952.33 an ounce, down from USD1,957.56 at the close on Friday.

In the FTSE 250, Ruffer Investment closed down 0.2%. The investment firm said its net asset value decreased over the past year, blaming both economic headwinds and its own mistakes.

At June 30, Ruffer's NAV per share was 285.61 pence per share, down 3.2% from 294.98p on the same date in 2022. Ruffer called the figures "disappointing" after several more-profitable years, but said its performance still was ahead of global equities and bonds.

Elsewhere in London, Tullow Oil finished 9.2% higher. The oil company said production at the Jubilee field has surpassed 100,000 barrels of oil per day. This was achieved after a second production well was brought on stream, the company said.

On AIM, Dianomi plunged 40%. The digital advertising platform said it expects revenue for 2023 to fall from a year earlier and to come in below market expectations, after noting the decline in traffic volumes as a "key challenge" for publishers.

Revenue in 2023 is expected to be between GBP30.5 million and GBP32.5 million, falling 9.5% to 15% from GBP35.9 million in 2022.

In European equities on Monday, the CAC 40 in Paris ended down 1.2%, while the DAX 40 in Frankfurt ended down 0.2%.

Germany's economy likely resumed growth in the spring, breaking a brief technical recession over the winter.

The German Bundesbank central bank said in its July monthly report that private consumption, which had been quickly declining, had stabilized.

Over the winter, the German economy slipped into a technical recession with two negative quarters in a row between October 2022 and March 2023. Most experts blamed the negative growth on high inflation, which damped consumer spending and pushed down demand for German industrial exports abroad.

Stocks in New York were higher at the London equities close, with the Dow Jones Industrial Average up 0.2%, the S&P 500 index up 0.3%, and the Nasdaq Composite up 0.6%.

"All eyes are now turning toward the US companies' earnings this week. The first earnings from the big US banks came in better-than-expected last Friday and added to the overall investor enthusiasm after the US inflation data confirmed an encouraging easing in the US inflation, which in return softened the hawkish Federal Reserve expectations," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

This week, there will be results from the likes of Bank of America, Goldman Sachs, Netflix, Tesla and Johnson & Johnson.

Meanwhile, in the UK corporate calendar on Tuesday, there are half-year results from Ocado as well as trading statements from Wise, Rio Tinto and Artisanal Spirits.

The economic calendar has retail sales data for the US at 1330 BST, followed by a US industrial production print at 1415 BST.

By Heather Rydings, Alliance News senior economics reporter

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