London share prices were lower at midday on Tuesday, with the FTSE 100 weighed down by mining and oil shares due to concern about demand from China.
The large-cap index was down 18.76 points, 0.2%, at 7,841.31. The FTSE 250 was down 43.76 points, or 0.2% at 20,038.57. The AIM All-Share was down just 0.05 of a point at 861.54.
The Cboe UK 100 was down 0.3% at 784.42, the Cboe UK 250 was down 0.3% at 17,485.48, and the Cboe Small Companies was down 0.3% at 13,763.95.
AJ Bell’s Russ Mould said London’s flagship index was ‘treading water’ after Chinese fourth-quarter growth figures showed the impact Covid had on the world‘??s second largest economy.
‘China has particular influence over the FTSE 100 thanks to a heavy weighting for commodity stocks of which the country is a rapacious consumer,’ he explained.
China’s economy grew by 3.0% in 2022, official data released on Tuesday showed, one of the weakest rates in 40 years owing to the Covid-19 pandemic and a real estate crisis.
Beijing had set itself a target of 5.5% growth last year, a rate already much lower than the economic performance in 2021, when the country’s gross domestic product increased more than 8%.
In London, commodity stocks were in the red. Among miners, Glencore was down 1.5%, and Fresnillo was down 0.8%. Among oil companies, Shell was down 0.7%.
Rio Tinto, however, was up 0.3%. In a trading update, the Anglo-Australian miner maintained its guidance for the year ahead on Tuesday, after ending the fourth quarter with production slightly up on last year.
Rio said that overall production was higher in 2022 versus the previous year across all commodities, except for aluminium.
Looking ahead, it warned of high volatility in the coming quarter due to the end of Covid-19 controls in China, with increased short-term risks of supply chain disruptions and labour shortages.
Nonetheless, Rio kept its 2023 production guidance unchanged.
Ocado was the blue-chip index’s worst performer at midday, down 7.1% after its joint venture with high-street retailer Marks & Spencer said annual revenue had fallen by 3.8% to £2.2 billion.
This came despite revenue in the 13 weeks to November 27, its financial fourth quarter, rising by 0.3% against the previous year to £549.4 million.
Ocado Retail expects to be close to break-even earnings before interest, tax, depreciation and amortisation in financial 2022.
Looking ahead to financial 2023, it expects ‘marginally positive’ Ebitda on mid-single-digit percentage revenue growth.
Shares in Marks & Spencer were flat.
Diageo was up 0.9%. The London-based brewer and distiller said it will buy Don Papa Rum, a dark rum from the Philippines, for an initial payment of €260 million.
The Guinness, Baileys and Smirnoff-owner said it will initially pay €260 million with a further potential payment of up to €177.5 million through to 2028 based on performance of the ‘super-premium, dark rum’.
In the FTSE 250, Hays rose 2.6% as it reported that net fees rose by a double-digit percentage in its second financial quarter as its Germany-based business grew significantly higher than other regions.
In the three months ended December 31, the London-based recruitment company said net fees recorded 11% growth against the previous year, driven by increased fee margins and the targeting of higher-value markets. On a like-for-like basis, growth was 8%.
The growth was driven by Germany, where net fees grew by 25%, or 22% on a like-for-like basis.
Elsewhere in London, Medica Group was up 6.2%.
The telemedicine services provider said revenue in 2022 was in-line with market expectations and 24% higher than the previous year. It cited a strong performance in the second half of the year, driven in particular by UK Elective division revenue.
On AIM, Revolution Bars plunged 27%. The bar and pub owner said, in the first half of 2022, like-for-like sales were 9.4% below the same period pre-pandemic.
As a result, the board said it has reassessed its expectations for financial 2023, which ends in June. It now expects Ebitda for the year lower than previously anticipated. The figure is anticipated at the bottom end of market expectations which it puts between £6.7 million to £10.5 million.
The pound was quoted at $1.2224 at midday on Tuesday in London, higher compared to $1.2203 at the close on Monday.
The UK unemployment rate remained steady in November, according to the latest data from the Office for National Statistics, but average pay adjusted for inflation shrank at one of the fastest rates on record.
The unemployment rate was 3.7% in the UK in the three months from September to November, unchanged from the August to October period, but up from 3.5% in the June to August period.
Annual growth in average total pay, including bonuses, and in regular pay, excluding bonuses, both were 6.4% in September to November period. This means pay continued to lag inflation in the UK. Consumer prices rose by 10.7% in November from a year before.
Analysts at Lloyds Bank said that the headline measures of the UK labour market were broadly in line with the Bank of England’s November forecasts.
However, they noted that the record wage growth will likely add to concerns of the risk of inflation persistence, ‘maintaining the pressure to tighten monetary policy’.
In European equities on Tuesday, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 0.1%.
The euro stood at $1.0818, marginally lower against $1.0822. Against the yen, the dollar was trading at JP¥128.89, higher compared to JP¥128.55.
Ricardo Evangelista at ActivTrades said that there have been a ‘crescendo’ in expectations that the Bank of Japan will move towards ending the ‘ultra-accommodative monetary policy’ of the last few years, with a further relaxation of its yield curve control seen as a ‘clear’ confirmation of such intentions.
‘Should the BoJ confirm expectations and announce a further relaxation of its yield curve control policy, then there will be scope for further yen gains,’ Evangelista argued.
Japan’s central bank began a two-day policy meeting on Tuesday.
‘The outcome of the BOJ’s meeting tomorrow remains a key source of uncertainty,’ said Bannockburn Global Forex. ‘We suspect operation changes rather than substantive policy adjustments, like abandoning the yield-curve control or widening the 10-year band further, but, of course, recognize the pressure to act.’
Stocks in New York were called to open lower as trading returns after a public holiday in the US on Monday. The Dow Jones Industrial Average was called down 0.2%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.4%.
Brent oil was quoted at $85.24 a barrel at midday in London on Tuesday, up from $84.20 late Monday. Gold was quoted at $1,906.88 an ounce, sharply lower against $1,917.90.
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