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London open: Airlines and housebuilders weigh on Footsie
London stocks struggled to hold their ground on the first day of October as disappointing data from China, an airline profit warning and housing sector angst were offset by positive news on North American trade.
The FTSE 100 was essentially flat at 7,508.29 after a little over an hour of trading on Monday, down less than two points.
Markets across the globe were rallying on an improved picture for global trade after Canada and the US were reported to have reached an agreement on how to revamp Nafta.
Dampening down some of the uncertainty around global trade, the two countries hammered out a deal to join up with the agreement reached between the US and Mexico in August.
This sent S&P 500 futures shooting up towards record territory, whilst Japanese yen tumbled to a fresh 2018 low versus the dollar on diminished safe haven demand.
“There was no such reaction in Europe, in part because the markets are more worried about America’s relationship with another country beginning with C,” said Connor Campbell, market analyst at SpreadEx.
Yields in Europe were moving, analysts at Rabobank noted, of a report by Italian daily La Repubblica that there were “rumours” in Brussels that the European Commission will be forced to reject the Italian govt’s budget proposals in November The 10-year spread between Italian and German government bonds was a shade over eight basis points wider at 275.7bp.
As for the forex markets, the euro’s Italian budget blues carried over from the end of September. The single currency shed another 0.3% against the dollar, keeping it at a sub-$1.158 3 week nadir, while losing 0.2% against the pound to lurk at a 10 day low. Sterling couldn’t pair its gains against the euro with any success against the greenback, however, with cable trapped below €1.304.
On the other side of the globe, China’s official manufacturing purchasing managers index fell much more than expected in September to from 51.3 to 50.8, falling short of economists’ forecasts for a reading of 51.2. Earlier the Caixin’s factory sector PMI slipped from 50.6 for the month of August to 50.0 in September, versus the 50.5 expected.
“The sector just managing to remain in expansion is the clearest sign yet of the impact of the US trade tensions on the Chinese economy” said analyst Jasper Lawler at London Capital Group. However, while miners traced metal prices lower in Australia, the trend was not followed by the heavily weighted miners on the FTSE, which were either flat or higher.
Later in the morning the UK manufacturing PMI is expected to show a fall to 52.5 from 52.8. At the same time, 0930 BST, the Bank of England will release figures on mortgage lending and consumer credit for August.
In a fairly quiet start to the week for corporate news in London, airlines easyJet and BA owner IAG were flying lower after a profit warning from Irish budget airline Ryanair. The Dublin-based carrier blamed cabin crew and pilot strikes, lower traffic and weaker fares as it cut full year profit guidance 12% to €1.1-1.2bn from €1.25-1.35bn previously, also warning that it cannot rule out further downgrades due to the potential for more disruptions later in the year.
Housebuilders were in the red after Theresa May looked to add a new stamp duty on foreign buyers to her Chancellor’s upcoming Budget, which analysts at UBS said was “an unhelpful development for the London housing market”. South East-focused Berkeley Group led the Footsie fallers, with Taylor Wimpey, Barratt and Persimmon not far behind.
AstraZeneca was slightly lower even though it agreed a deal with Germany’s Cheplapharm Arzneimittel for the commercial rights to Atacand and Atacand Plus heart and hypertension treatments, starting with an up-front $200m and with further sums and sales-contingent milestones payable in future.
Assura, the healthcare property developer, was little moved as it reported completion of 39 medical centres and two developments at a total cost of £108.2m in the first half of its trading year.
Computacenter was moving higher as it bought US-based IT firm FusionStorm for up to $90m (£69m) plus $45m in refinancing. The FTSE 250 company said it would integrate its existing US business with FusionStorm leading to a 50% rise in headcount in the Americas region.
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