LONDON MARKET MIDDAY: Shares directionless amid poor economic readings

(Alliance News) - London stock prices struggled for direction midday Wednesday, with sentiment damped by fresh antagonism between the US and China and poor services sector readings, despite some M&A impetus.

European peers enjoyed more confident morning trading, though gains for the DAX 40 in Frankfurt and CAC 40 in Paris were modest, as a warning from BMW sent automotive firms lower.

The FTSE 100 was marginally lower, down 2.56 points at 7,406.55, midday Wednesday. The FTSE 250 index was up 24.45 points, 0.1%, at 19,898.52. The AIM All-Share index was up 6.09 points, or 0.7%, at 915.43.

The Cboe UK 100 index was down 0.2% at 739.29. The Cboe 250 was up 0.1% at 17,349.65. The Cboe Small Companies was up 0.1% at 13,898.44.

The CAC 40 in Paris and DAX 40 in Frankfurt were both 0.2% higher.

"Investors already have more than enough on their plate. Now they find themselves having to make room for one more worry, as tensions build between the US and China," AJ Bell analyst Russ Mould commented.

"After several trade spats during the Trump administration, things had largely calmed down under his successor. But Nancy Pelosi's visit to Taiwan to see the president there has been met with stern warnings from Beijing. So far, the response has been to hold military drills and step up sanctions on a country it regards as a breakaway province. However, a sell-off on Wall Street suggested there is concern about an escalation."

In response to Pelosi's arrival, China launched military exercises in six areas in the waters surrounding Taiwan. They are expected to include long-range live-fire exercises and last through Sunday.

The manoeuvres are seen as the biggest show of military muscle from Beijing since the 1995 Taiwan Strait crisis, when China fired missiles over Taiwan and the US dispatched two aircraft carrier groups.

The geopolitical tensions boosted the safe-haven dollar.

The pound was quoted at USD1.2182 midday Wednesday in London, down from USD1.2210 late Tuesday. The euro stood at USD1.0182, down from USD1.0195. Against the yen, the dollar was trading at JPY133.31, up sharply from JPY131.80.

Gold fell in line with the yellow metal's generally inverse relationship with the greenback. The precious metal stood at USD1,761.38 an ounce, down from USD1,778.85 late Tuesday in London.

Services sector readings in the UK and eurozone were weaker on Wednesday.

The eurozone's private sector started the third quarter in the doldrums, dragged down by the manufacturing sector and stoking fears of recession. July's S&P Global composite purchasing managers' index dropped to a 17-month low of 49.9 points in July from 52.0 in June.

The composite decline was partly due to a worse month for the services economy. The eurozone services PMI faded to 51.2 points in July from 53.0 in June. July's figure was six-month low.

The UK services sector expanded at the slowest pace in 17 months, amid meek new business despite firms stepping up hiring. The latest S&P Global/CIPS UK services PMI faded to 52.6 points in July, from 54.3 in June.

The tracker has registered above the 50.0 no change mark for 17 months in-a-row, though the latest PMI figure was the weakest since February 2021.

Brent oil was quoted at USD99.56 a barrel midday Wednesday UK time, down from USD99.99 at the London equities close on Tuesday. The OPEC+ group of major oil exporters meets Wednesday to discuss its output strategy.

"Brent is still trading below USD100 this morning as both event and headline risk continues to keep energy traders quick on the uptake," SPI Asset Management analyst Stephen Innes commented.

"Aside from a possible event risk from a shift in OPEC+ production policy when the group meets later, oil traders remain laser-focused on global macro data, particularly concerning the two largest oil-consuming economies in the world, the USA and China."

In London, Avast shares jumped 43% after the UK Competition & Markets Authority said it has provisionally cleared NortonLifeLock's acquisition of the cybersecurity firm, following an in-depth probe of the deal.

The deal, announced back in August 2021, valued Avast at up to USD8.6 billion at the time. Avast currently has a market capitalisation of GBP7.06 billion, about USD8.61 billion.

Taylor Wimpey climbed 4.8% as the housebuilder reported a rise in interim profit as it trimmed expenses. It also hailed the resilience of the UK housing market.

Revenue in the half-year that ended July 3 came in slightly lower, however, at GBP2.08 billion, down 5.4% from GBP2.20 billion a year earlier.

Pretax profit rose 16% year-on-year to GBP334.5 million from GBP412.5 million. Net operating expenses were 15% lower at GBP189.9 million.

"The housing market continues to be resilient despite inflationary pressures in the wider economy and recent rises in the Bank of England base rate," it said.

The Bank of England meets again on Thursday.

Also supporting the FTSE 100, Ladbrokes-owner Entain added 2.5%. Mid-cap peer 888 climbed 3.0%.

The duo were higher following a couple of boosts to the global gambling sector.

Bloomberg on Wednesday reported China is to resume quarantine-free travel with gambling hub Macau. Casino and resorts firm Sands China added 3.3% in Hong Kong.

In the US, meanwhile, the state of Massachusetts is edging closer to passing sports betting legislations. Sports betting firm DraftKings said it is "hopeful" of a positive outcome. DraftKings shares jumped 8.9% in New York on Wednesday.

Back in London, Keywords Studios rose 6.4%. The firm is "confident" of beating market expectations in 2022, after a strong first half. First half revenue rose 34% year-on-year to EUR320 million, the Dublin-based firm said.

Keywords provides technical and creative services provider to video game industry.

It has been a busy week of earnings reports for the video game sector, one of the pandemic's biggest winners.

Console maker Nintendo on Wednesday posted a drop in sales in its first quarter as semiconductor supply issues hampered production of its Nintendo Switch product. Sales for the three months to June 30 fell 4.7% to JPY307.46 billion - around USD2.31 billion - from JPY322.65 billion a year before. Nintendo shares fell 1.9% in Tokyo.

Late Tuesday in the US, Electronic Arts said it delivered strong results in the first quarter with growing player network engaged in new games and live services. For three months to June 30, net revenue was up at USD1.77 billion from USD1.55 billion in the same quarter prior year.

Peer Activision Blizzard on Monday said revenue slumped to USD1.64 billion in the second quarter of 2022, from USD2.30 billion a year prior.

EA shares were up 1.2% in pre-market trade in New York, while Activision was up 0.9%.

New York equity market futures were higher on Wednesday. The Dow Jones Industrial Average was called up 0.4%, with the S&P 500 and the Nasdaq Composite up 0.3%.

In Frankfurt, BMW shares were down 5.0% as it posted weaker quarterly profit and warned annual vehicle deliveries will be "slightly below" last year.

Paris-listed peers Renault and Stellantis fell 1.9% and 1.1% in a negative read-across.

Still to come on Wednesday is a services PMI reading from the US at 1445 BST.

By Eric Cunha; ericcunha@alliancenews.com

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