LONDON MARKET CLOSE: Stocks slip on disappointing China economic data

(Alliance News) - Stocks in London finished lower on Monday after a slowdown in retail sales and industrial production in China and amid the Taliban's victory in Afghanistan.

Growth in China's retail sales and industrial production slowed in July, with a rebound of Covid-19 dragging on demand while recent floods disrupted businesses.

Retail sales rose 8.5% year-on-year in July, the National Bureau of Statistics said, below a Bloomberg consensus forecast of analysts. This figure was also below 12% growth in June, likely reflecting the virus resurgence in dozens of places last month, according to analysts. Industrial production rose 6.4% in July, easing as well from the month prior, the NBS said.

Meanwhile, victorious Taliban fighters patrolled Kabul on Monday after a stunningly swift end to Afghanistan's 20-year war, as thousands of people mobbed the city's airport trying to flee the group's feared hardline brand of Islamist rule.

President Ashraf Ghani flew out of the country on Sunday night as the insurgents encircled the capital, capping a military victory that saw them capture all cities in just 10 days.

US President Joe Biden is expected to address the nation on the situation at 2045 BST.

The FTSE 100 index closed down 64.73 points, or 0.9%, at 7,153.98. The mid-cap FTSE 250 index closed down 75.78 points, or 0.3%, at 23,712.67. The AIM All-Share index ended down 6.29 points, or 0.5%, at 1,259.97.

The Cboe UK 100 index ended down 1.0% at 712.00. The Cboe 250 lost 0.4% at 21,557.20, and the Cboe Small Companies closed 0.4% lower at 15,485.60.

In Paris the CAC 40 ended down 0.8%, while the DAX 30 in Frankfurt ended down 0.3%.

"Having seen European markets eke out incremental gains on an almost daily basis since the beginning of the month, it shouldn't have been too much of a surprise to see a little bit of a pullback at some point. We certainly don't have to look too far for the catalyst for today's weakness, having got a weak hand off from markets in Asia, which came under pressure in the wake of some really disappointing data out of China," commented CMC Markets analyst Michael Hewson.

"We got some indication of a slowdown in the recent China trade numbers last week, however the extent of the slowdown in the latest industrial production and retail sales in July has prompted some significant weakness in the likes of companies tied to the economic cycle in Asia, and China especially, with the FTSE 100 getting hit particularly hard," Hewson added.

In the FTSE 100, Mexican precious metals miner Fresnillo ended the best performer, up 1.8%, tracking spot gold prices higher.

Gold was trading at USD1,786.04 an ounce at the London equities close, strengthening against USD1,775.40 late Friday.

"Gold is surprisingly thriving a week after a small flash crash sent it tumbling back towards USD1,680. Since then, the yellow metal has done well; a combination of an over-exaggerated initial move being unwound and a softer dollar/lower yields giving it new life," explained Oanda markets analyst Craig Erlam.

At the other end of the large-caps, luxury goods retailer Burberry Group closed down 3.4% after the weak China retail sales figures.

Continental peers Kering and LVMH, which like Burberry have a strong presence in the world's second-largest economy, closed 4.8% and 2.4% lower respectively in Paris.

In addition, miners Glencore, BHP Group, Rio Tinto and Anglo American were down 2.1%, 1.8%, 2.2% and 2.4% respectively, after sluggish China industrial production data.

Meanwhile, BHP and Woodside Petroleum said they are in talks regarding the possible acquisition by Woodside of BHP's petroleum business. The division is worth about USD14.7 billion, according to Bloomberg.

"BHP confirms that we have initiated a strategic review of our Petroleum business to re-assess its position and long-term strategic fit in the BHP portfolio. A number of options are being evaluated. One option is a potential merger of the Petroleum business with Woodside Petroleum and a distribution of Woodside shares to BHP shareholders," BHP said.

In the FTSE 250, Ultra Electronics closed the best performer, up 6.0% at 3,350.00 pence. The defence contractor agreed to a GBP2.6 billion takeover offer from former London listing Cobham, which has pledged to protect UK jobs in a bid to woo regulators.

Cobham will pay GBP35.00 per share in cash for Ultra, valuing the firm at about GBP2.57 billion, which includes a 16.2 pence interim dividend declared earlier by Ultra.

The London-based aerospace and defence engineering company in July said it had received a non-binding proposal of GBP35.00 per share from Cobham. This followed a number of earlier proposals, Ultra said, the first of which was made on June 29 at a price of GBP28.00 per share.

Future closed up 5.0% after the magazine publisher splashed GBP300 million in a deal which will see it add titles such as The Week to its portfolio. Bath, England-based Future will acquire consumer media subscriptions firm Dennis Publishing from private equity firm Exponent Private Equity LLP.

The pound was quoted at USD1.3850 at the London equities close, marginally lower from USD1.3859 at the close Friday.

The euro stood at USD1.1785 at the European equities close, falling from USD1.1795 late Friday. Against the yen, the dollar was trading at JPY109.15, down sharply from JPY109.76.

Stocks in New York were down at the London equities close, amid a sharp uptick in Covid-19 infections, with some cities reimposing mask mandates, and data showing signs of eroding confidence and slowing activity.

The DJIA was down 0.4%, the S&P 500 index down 0.5% and the Nasdaq Composite down 1.2%.

Among individual companies, Tesla fell 3.6% as US authorities announced a probe of its Autopilot driver-assistance service, citing 11 crashes.

Brent oil was quoted at USD69.15 a barrel at the equities close, down sharply from USD70.94 at the close Friday, amid surging Covid-19 cases linked to the Delta variant.

The economic events calendar on Tuesday has UK unemployment data at 0700 BST, eurozone economic growth figures at 1000 BST and US retail sales numbers at 1330 BST.

The UK corporate calendar on Tuesday has annual results from BHP and Van Elle Holdings.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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