LONDON MARKET OPEN: Miners fall after disappointing China GDP print

(Alliance News) - Stock prices in London drifted into the red at Monday's open, as investors digested the latest set of concerning economic data from China, and awaited more earnings from big US companies.

The FTSE 100 index opened down 2.96 points at 7,431.61. The FTSE 250 was down 46.22 points, 0.3% at 18,520.59, and the AIM All-Share was down 0.2 of a point at 750.60.

The Cboe UK 100 was down 0.1% at 741.36, the Cboe UK 250 was down 0.3% at 16,243.69, and the Cboe Small Companies was slightly lower at 13,494.55.

China-exposed sectors such as mining and oil were weighing on the FTSE 100 after a weak gross domestic product print from the country. Meanwhile, housebuilding stocks drifted lower as data revealed a fall in UK house prices.

In European equities on Monday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.3%.

China's economy grew 6.3% year-on-year in the second quarter, a figure that belies the country's slowing post-pandemic recovery and one that analysts warn is inflated given the low base of comparison with lockdown-wracked 2022. Beijing's National Bureau of Statistics released the growth data, saying in a statement that the economy "showed a good momentum of recovery".

"By quarter, the GDP grew by 4.5% year-on-year in the first quarter and 6.3% in the second quarter," NBS spokesman Fu Linghui said. While faster than the first quarter, the reading was below FXStreet-cited market consensus of 7.3%.

In quarter-on-quarter terms, Monday's data showed the world's second-largest economy only grew 0.8% in April through June, slowing from the 2.2% growth seen in the first three months of 2023.

Further data from China also pointed to a slowing in retail sales growth in June, while youth unemployment hit a record high.

Retail sales, a key gauge of consumption, edged up 3.1% in June from a year earlier, according to the NBS, slowing from the 13% rise in May. Unemployment among Chinese youth also jumped to a record 21.3% in June, up from 20.8% in May, the NBS said.

In China, the Shanghai Composite closed down 0.9%, while the S&P/ASX 200 in Sydney closed down 0.1%. Financial markets in Hong Kong were closed due to a typhoon, while markets in Tokyo were closed as planned for Marine Day.

"The sheer scale of China's economy means a perceived stalling in the post-pandemic recovery has ramifications for global demand and economies," noted Hargreaves Lansdown's Sophie Lund-Yates.

Oil prices retreated slightly after the weak Chinese data, with a barrel of Brent oil trading at USD79.02 early Monday, lower than USD80.12 late Friday. Oil majors BP and Shell fell 0.7% in early trading.

"The weaker Chinese data raises questions about the demand profile. At the same time, a previous production block in Libya has been resolved, adding extra supply into the equation. The overall effect of recent moves is relatively muted, but the situation in China is the element that needs to be watched closely – any further shocks, especially around stimulus, will have immediate knock-on effects for the oil price," HL's Lund-Yates continued.

Other China-exposed sectors took a hit among London's large-caps. Miners saw early selling pressure, with Anglo American down 2.0%, Antofagasta down 1.8% and Glencore down 1.6%.

Gold was quoted at USD1,952.27 an ounce early Monday, lower than USD1,957.56 on Friday.

Luxury fashion company Burberry fell 1.1%, with China being a key market.

The FTSE 100's housebuilders also fell, as data from Rightmove showed a fall in UK house prices.

UK house prices in July fell faster than normal for the time of year, according to data from Rightmove. Property prices dropped by 0.2%, or GBP905, in July, despite usually treading water this time of year. The fall was driven by rising mortgage costs placing larger constraints on buyers. The average house price in July was GBP371,907, Rightmove said.

House prices remain 2.6% higher than in January, however, proving more resilient than many expected. On an annual basis, house prices rose 0.5% in July, easing from a 1.1% rise in June.

Barratt Developments, Taylor Wimpey and Persimmon fell 0.6%.

In the US on Friday, Wall Street ended mixed, with the Dow Jones Industrial Average up 0.3%, the S&P 500 down 0.1% and the Nasdaq Composite down 0.2%. Earnings season had kicked off on Friday with mixed results from big US banks.

JPMorgan Chair & Chief Executive Jamie Dimon warned that increased regulation in the wake of bank failures this year would raise costs for consumers and businesses.

Dimon said the US economy is "resilient", although he cautioned on "salient risks" as consumers slowly exhaust "their cash buffers".

On Tuesday, there will be half-year results from Bank of America, with Goldman Sachs, IBM, Netflix and Tesla reporting on Wednesday.

The dollar was mixed against major currencies in early exchanges in Europe.

Sterling was quoted at USD1.3092 early Monday, lower than USD1.3117 at the London equities close on Friday. The euro traded at USD1.1241, higher than USD1.1240. Against the yen, the dollar was quoted at JPY138.62, up versus JPY138.55.

Meanwhile, M&A activity continued to return in London. AIM-listed Gresham House said it has reached an agreement on a recommended final takeover offer in cash with Searchlight Capital. Its shares jumped 56% to 1,006 pence.

Gresham shareholders will be entitled to receive 1,105p per share, which is a 63% premium to its Friday closing price of 680.00p. The offer values the AIM-listed asset manager at around GBP469.8 million on a fully diluted basis, or GBP440.6 million on an enterprise value basis. Gresham's board of directors said they intend to unanimously recommend the offer at the court and general meetings to come in due course.

"Searchlight is attracted by Gresham House's position as one of the UK's leading asset managers in sustainable alternative asset classes, which show strong investor interest and allocation," the release said.

It will be a quiet day in the economic calendar on Monday, but the week picks up pace with inflation data from the UK and eurozone on Wednesday.

By Elizabeth Winter, Alliance News senior markets reporter

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