LONDON MARKET MIDDAY: FTSE 100 Falls As China's Economic Growth Slows

(Alliance News) - Stocks in London were mixed at midday on Friday, with the FTSE 100 lower following weak economic growth data from China.

The FTSE 100 index was down 11.16 points, or 0.2%, at 7,171.16. The FTSE 250 was up 43.06 points, or 0.2%, at 20,263.47 and the AIM All-Share 0.2% higher at 884.05.

The Cboe UK 100 index was down 0.4% at 12,160.64. The Cboe UK 250 was up 0.2% at 18,205.25 and the Cboe UK Small Companies 0.1% higher at 11,116.12.

In Paris the CAC 40 was down 0.4%, while the DAX 30 in Frankfurt was up 0.1%.

China's economy expanded at its slowest rate in nearly three decades in the third quarter, hit by cooling domestic demand and a protracted US trade war, data showed, with an official warning of "mounting downward pressure".

Gross domestic product expanded 6.0% in the third quarter, down from 6.2% in the second quarter, according to the National Bureau of Statistics.

City Index analyst Fiona Cincotta said: "The FTSE was weaker at the start of the trading day, taking its cue from Asia where a decline in Chinese GDP to a new low of 6% took the wind out of the sails of Asian markets. Though analysts had expected to see Chinese GDP growth to be weaker than in the previous quarters the overall expectation was of an increase of 6.1% with a decline to below 6% at some point next year.

"However, Friday's data shows that the decline is accelerating and that trade war frictions are taking their toll faster than expected. This will be particularly negative for resources companies like oil and miners which depend on Chinese demand to keep overall demand growing in an environment in which large portions of the global economy are slowing."

In the FTSE 100, InterContinental Hotels Group was the worst performer, down 2.9% after the hotel operator reported a reduction in third-quarter revenue amid unrest in Hong Kong and softness in some of its operating markets.

Revenue per available room, a key performance metric for the hotel industry, for the three months to the end of September was down 0.8%, hurt by "tougher" trading conditions in the US and China, and ongoing civil unrest in Hong Kong, IHG said. For the first nine months of 2019, RevPAR remained flat year-on-year.

In addition, IHG said the strengthening of the US dollar against many major currencies globally has hurt its RevPAR by a 1.9% in the third quarter, when reported at actual exchange rates.

Miners Rio Tinto, BHP, Anglo American and Glencore were down 0.5%, 0.4%, 0.4% and 0.2% respectively following the disappointing China GDP figures.

Conversely, London Stock Exchange Group was up 0.9% after the stock exchange operator reported a strong third quarter, with the Capital Markets unit performing well despite "challenging" market conditions.

LSEG, which earlier in October rebuffed a GBP30 billion bid from Hong Kong Exchanges & Clearing, posted a 12% increase in total income for the three months to September to GBP587 million. On a nine-month basis, LSEG's total income has risen 9% to GBP1.73 billion. Information Services revenue was up 9% to GBP230 million, and Capital Markets by 14% to GBP102 million.

Like-for-like Capital Markets revenue growth was 5%, with primary markets and fixed income trading offsetting "subdued" equity markets. LSEG is in the midst of a USD27 billion takeover of market data firm Refinitiv, and said good progress is being made. It is on track for completion in the second half of 2019.

LSEG shareholders will vote on the Refinitiv acquisition in November.

In the FTSE 250, Avast was the best performer, up 5.5% after the antivirus software maker reported "good" third-quarter growth, with all guidance for 2019 reaffirmed.

For the three months to September, Avast posted adjusted earnings before interest, taxes, depreciation, and amortisation of USD121.9 million, 8.7% higher year-on-year. For the nine months, adjusted Ebitda grew 6.6% to USD358.5 million. Avast's adjusted revenue climbed 5.0%, or 6.6% excluding foreign exchange, to USD220.3 million.

The pound was quoted at USD1.2900 at midday, up from USD1.2831 at the London equities close Thursday, as UK lawmakers get set to sit on Saturday to vote on UK Prime Minister Boris Johnson's freshly brokered Brexit deal.

Johnson launched a charm offensive on Friday to sell his Brexit deal to sceptical MPs, with a looming vote in parliament resting on a knife-edge.

The PM has no majority among MPs, opposition parties have come out against the deal and his parliamentary ally, Northern Ireland's hardline Democratic Unionist Party said it cannot support the terms.

If the Commons rejects the deal, Johnson will be forced by law to ask the EU to delay Brexit, for what would be the third time. He has said he would rather "die in a ditch" than do so.

European Commission President Jean-Claude Juncker sought to focus MPs' minds, saying Brussels can see no need to prolong the tortuous three-year Brexit process – although the decision to delay, if requested by London, would be for EU leaders.

Analysts at FXPro commented: "The approval of the Parliament has the potential to help Sterling to develop its rally, finally removing the risks of the chaotic Brexit from the agenda. In this case, GBPUSD has the opportunity to gain a foothold in USD1.3200 area - this year highs, where it rose during the periods of enthusiasm regarding the Brexit. An important factor in favour of purchases may be the closing of many short positions in the British currency, built in anticipation of a no-deal Brexit.

"But 'what will happen next question' is more and more of the minds of analysts. And the answer to it unlikely seem positive now. Most likely, the Bank of England will have to cut interest rates to support an economy facing shocks in demand. The Bank of England can then act like the ECB and the Fed, which are taking active steps to ease their monetary policy."

Parliament will be sitting on Saturday for the first time since the Falklands War in 1982.

Stocks in New York were set for a flat open with soft drinks maker Coca-Cola Co, credit card company American Express and oilfield services firm Schlumberger reporting earnings before the market open in New York.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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