LONDON MARKET MIDDAY: Hong Kong Violence Unsettles Global Markets

(Alliance News) - Violent scenes from protests in Hong Kong set back a number of London-listed stocks on Monday, the unrest adding to existing market unease over the US-China trade situation.

The FTSE 100 was 89.04 points lower, or 1.2%, at 7,270.34 Monday midday. The FTSE 250 was down 122.17 points, or 0.6%, at 20,235.46, and the AIM All-Share was down 0.3% at 889.38.

The Cboe UK 100 index was down 1.2% at 12,321.2. The Cboe UK 250 was down 0.5% at 18,156.87 and the Cboe UK Small Companies was 0.1% lower at 11,253.14.

In European equities, the CAC 40 index in Paris was down 0.2% and the DAX 30 in Frankfurt down 0.6% in early afternoon trade.

"Stock markets in Europe are suffering today on account of the unrest in Hong Kong and the creeping concerns about the US-China trade situation," said David Madden at CMC Markets.

"Protests and violence on the streets of Hong Kong are not a good look for the financial hub or indeed China. The situation in the Far East appears to be getting worse, and when you factor in a cooling of the bullish sentiment surrounding the US-China trading relationship, it's no wonder equities are lower this morning," said Madden.

A Hong Kong police officer shot a masked protester in an incident shown live on Facebook on Monday while a man was set alight, during one of the most violent days of clashes seen since pro-democracy unrest erupted more than five months ago.

Protesters, who had already begun a city-wide day of action aimed at paralysing the international financial hub, reacted to the morning shooting by rampaging through train stations, barricading streets and vandalising shops.

The scenes caused the Hang Seng index in Hong Kong to close 1.8% lower overnight.

London-listed stocks with a large exposure to Hong Kong, such as fashion house Burberry, life insurer Prudential and lender Standard Chartered, were down 2.8%, 2.7% and 2.7% respectively at midday.

In the US, stocks are pointed for a lower open, in step with Europe. The Dow Jones is seen down 0.4%, as is the S&P 500, while the Nasdaq Composite is pointed 0.5% lower.

In economic data on Monday, official statistics showed the UK managed to avoid slipping into a recession in the third quarter.

UK gross domestic product grew 0.3% in the three months to September on the preceding quarter, following a contraction of 0.2% in the second quarter. The third-quarter figure was in line with consensus, according to FXStreet.

Two successive quarters of contraction signal a technical recession, meaning the UK economy has dodged entering a recession with this latest print. The economy grew 0.6% in the first quarter.

"GDP grew steadily in the third quarter, mainly thanks to a strong July. Services again led the way with construction also performing well. Manufacturing failed to grow as falls in many industries were offset by car production bouncing back following April shutdowns," an ONS spokesperson commented.

However, looking over the past year, growth has slowed to its weakest pace in almost a decade. Annually, GDP expanded 1.0% in the third quarter, below forecasts for 1.1% growth.

"While the UK is being kept out of recession by surprisingly resilient consumer spending, the outlook for investment continues to look challenging as we move into 2020. We don't expect rate cuts from the Bank of England just yet, but that could change if the jobs market markedly deteriorates as we move into 2020," commented ING.

The pound was quoted at USD1.2828 at midday, up from USD1.2784 late Friday.

Turning back to the London Stock Exchange, and Greggs was leading the mid-cap gainers as shares in the bakery products retailer rose 14%.

In the period to November 9, total sales at Greggs were up 12% year-on-year and the bakery chain registered like-for-like growth of 8.3% in its company-managed shops. In the same period last year, total sales rose by 8.3% and by 4.0% on a like-for-like basis.

The FTSE 250 firm now expects its full-year pretax profit, excluding exceptional costs, to be higher than previous internal expectations.

Greggs explained: "Sales growth continues to be driven by increased customer visits and has been stronger than we had expected given the improving comparative sales pattern that we saw in the fourth quarter last year. Operational costs remain well controlled and, whilst the comparative sales become stronger still in the balance of the year."

Sirius Minerals rose 12% after outlining a new two-stage development plan for its North Yorkshire polyhalite mine as it looks to secure funding for the first stage of the project.

In September, Sirius announced it had struggled to secure the required funding for its current project plan due to "market conditions". Consequently, the firm intended to slow the development of its polyhalite mine.

Sirius remains focused on extracting first polyhalite from the mine in order to remove the "greatest perceived construction risk associated with deep shaft construction". This will allow Sirius to explore a wider and cheaper range of long-term financing options for the ramping-up of production.

The Scarborough-based firm expects the initial phase to require around USD600 million in investment in addition to its current cash reserves.

"It seems like Sirius' army of retail shareholders – which are in the tens of thousands – remain optimistic that its potash mine will be built, despite a major funding setback earlier this year," commented Russ Mould at AJ Bell.

"At this stage, Sirius has no cards to play. It is desperate for money and will have little bargaining power in any negotiations with a potential strategic investor. A third party looking to bail Sirius out of a tricky situation will want the best possible deal for them, as they are taking on considerable risk backing a project which is not yet generating any revenue," Mould added.

Aston Martin Lagonda Global Holdings advanced 4.0% after HSBC raised the luxury sports car maker to Buy from Hold.

By Lucy Heming; lucyheming@alliancenews.com

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