Stocks slide as weak Chinese data lowers mood

(Alliance News) - Stocks in London closed lower on Tuesday as disappointing data from China put a dampener on an already fragile market mood.

The FTSE 100 index closed down 27.07 points, or 0.4% at 7,527.42 on Tuesday. The FTSE 250 ended down 20.13 points, or 0.1%, at 18,841.54. The AIM All-Share closed down 0.93 of a point, or 0.1%, at 758.70.

The Cboe UK 100 ended down 0.4% at 750.52, the Cboe UK 250 closed down 0.3% at 16,511.40, and the Cboe Small Companies ended down 0.4% at 13,149.62.

Last month, China suffered its biggest drop in exports for more than two years. Sales of Chinese products to foreign markets plunged 14.5% on-year in July, a third consecutive drop, according to the customs authority.

The decline was bigger than expected and the heaviest drop since the start of 2020, when the economy came to a standstill in the early weeks of the Covid-19 pandemic.

The data will likely ramp up calls for leaders to do more to revive growth, having laid out a series of stimulus measures in recent weeks.

"The economy is quite clearly in need of a boost and I'm just not convinced it's going to come, not in the forceful and widespread manner it has in the past. Authorities are more likely to engage in smaller, targeted measures that won't provide the confidence boost investors, or households can really get behind. The sluggish recovery looks set to continue," said Craig Erlam, senior market analyst at Oanda.

In London, miners were among the stocks worst hit by Tuesday's disappointing Chinese data as commodity prices slid amid expectations of weaker demand from the world's second-largest economy.

Fresnillo closed down 3.1%, Anglo American down 2.0%, and Antofagasta down 1.9%.

Brent oil was quoted at USD84.92 a barrel at the London equities close on Tuesday, down from USD85.44 late Monday. Gold was quoted at USD1,925.90 an ounce, sharply lower against USD1,934.11.

Glencore dropped 2.9% after it reported underwhelming first-half results, as the miner grappled with falling coal prices and a less-than-supportive economic environment in China.

The Barr, Switzerland-based firm saw its net income attributable to equity holders plunge by 62% to USD4.57 billion in the first half of 2023 from USD12.09 billion a year earlier. Revenue dropped 20% to USD107.42 billion from USD134.44 billion.

abrdn was the worst blue-chip performer, however, ending 11% lower on Tuesday.

The company reported its assets under management shrunk in the first half of the year, with outflows continuing as it grappled with turbulent market conditions. The company also noted "challenging market conditions and net outflows from the 'risk-off' environment".

It extended its share buyback, however, and said it has the "key management resources on board" to ensure a promising future.

In the FTSE 250, TI Fluid Systems surged 15% after the company declared a vastly higher interim dividend of 2.30 euro cents as profit jumped, boosted by light vehicle production volume growth.

For the six months to June 30, the company reported a pretax profit of EUR58.9 million, leaped from EUR19.8 million a year prior. Revenue climbed 13% to EUR1.77 billion from EUR1.56 billion

Elsewhere in London, Palace Capital jumped 8.5%. The commercial real estate investor announced it plans to repurchase a further 4.3 million shares for no more than GBP11 million in total.

On AIM, MyHealthChecked plunged 24% after it said it expects revenue to drop in the first half of 2023, as demand for Covid-19 tests falls.

The consumer home-testing healthcare company expects revenue to fall by 74% to GBP2.5 million in the first half of the year, from GBP9.8 million the year prior.

"Despite the inevitable and anticipated fall in demand for Covid-19 testing, MyHealthChecked remains well-positioned to deliver its plan in 2023 given the distribution relationship we have established with Boots and their nationwide launch of our expanded portfolio of at-home wellness tests," said Chief Executive Officer Penny McCormick.

In European equities on Monday, the CAC 40 in Paris ended down 0.7%, while the DAX 40 in Frankfurt ended 1.1% lower.

Stocks in New York were lower at the London equities close, with the Dow Jones Industrial Average down 1.0%, the S&P 500 index down 1.0%, and the Nasdaq Composite down 1.3%.

The US dollar gained on Tuesday, meanwhile, as investors adopted an increasingly risk-off position in the wake of the weak Chinese export data and ahead of two key inflation prints.

The pound was quoted at USD1.2718 at the London equities close on Tuesday, down from USD1.2776 at the close on Monday. The euro stood at 1.0947, lower against USD1.1004. Against the yen, the dollar was trading at JPY143.29, up from JPY142.25 late Monday.

The July inflation figures from China and the US on Wednesday and Thursday, respectively.

Tim Waterer, chief market analyst at KCM Trade, said the US figures will be assessed in terms of whether inflation is receding fast enough to "cement the case" for a pause in interest rate hikes by the US Federal Reserve in September.

In contrast, the China data will be viewed from the angle of whether prices are slowing "too much", Waterer said, to the point where Beijing needs to "ramp up its stimulus efforts".

According to FXStreet-cited consensus, consumer price inflation in China is expected to fall 0.4% year-on-year in July, having been flat on an annual basis in June. Meanwhile, headline inflation in the US is expected to pick up to a 3.3% annual rise July, from 3.0% in June.

In the UK corporate calendar on Wednesday, there are half-year results from Flutter Entertainment, Hill & Smith and Coca-Cola HBC.

By Heather Rydings, Alliance News senior economics reporter

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