ADVFN Morning London Market Report: Monday 18 October 2021

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London open: Stocks edge down after China growth figures


London stocks edged lower in early trade on Monday as investors digested disappointing growth figures out of China.

At 0845 BST, the FTSE 100 was down 0.2% at 7,222.38.

Figures released earlier by the National Bureau of Statistics showed China’s economic growth slowed sharply in the third quarter amid power shortages and supply chain issues.

Growth slowed to 4.9% in the three months to the end of September from 7.9% in the previous quarter, marking the weakest growth in a year. This was below economists’ expectations for a 5.0% increase.

Growth also slowed sharply in seasonally-adjusted quarter-on-quarter terms, from 1.2% in the second quarter to 0.2% in the third.

Pantheon Macroeconomics economist Craig Botham said a slowdown in the y/y was always on the cards given base effects, but the q/q slowdown reflects the headwinds that arose in the third quarter.

“An obvious candidate for such a headwind is the energy crisis that emerging in September, and sure enough, delving into the subcomponents, there was a particularly sharp slowdown in secondary sector GDP growth, from 7.5% y/y to 3.6%,” he said.

“Meanwhile, tertiary sector GDP growth also saw a considerable slowdown, to 5.4% y/y from 8.3%. A larger part of this decline can be attributed to base effects, but still, we think this also shows the chill extending across the property sector. We will need to wait for a more detailed industry breakdown to confirm the drivers, but the monthly data does seem to support this interpretation.”

Data also showed that industrial production grew by 3.1% in September year-over-year, down from 5.3% growth in August and marking the slowest growth since March 2020, with manufacturing hit hard by supply chain disruptions and chip shortages.

Retail sales rose 4.4% on the year in September, up from 2.5% in August. Botham said a rebound had been on the cards after the surprisingly strong services surveys, driven by fading Covid outbreaks and the attendant easing of restrictions.

In UK equity markets, travel-related shares were under the cosh following gains at the end of last week, with British Airways parent IAGWizz AirCarnival and easyJet all lower.

On the upside, gambling software group Playtech surged nearly 60% after agreeing to be bought by Australian gaming machine maker Aristocrat Leisure in a £2.1bn deal. Sydney-based Aristocrat is paying 680p a share, a 58% premium to the company’s last closing price on October 15.

Drinks manufacturer C&C Group fizzed higher after an upgrade to ‘overweight’ at Barclays, while Drax was trading higher after an upgrade to ‘buy’ from ‘hold’ at Jefferies.


Top 10 FTSE 100 Risers

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# Name Change Pct Change Cur Price
1 Fresnillo Plc +2.51% +21.20 866.80
2 Evraz Plc +1.78% +11.00 628.40
3 Hargreaves Lansdown Plc +1.60% +23.50 1,494.50
4 Glencore Plc +1.33% +5.20 395.75
5 Bhp Group Plc +1.12% +22.30 2,011.50
6 National Grid Plc +0.91% +8.20 905.40
7 Sse Plc +0.89% +14.00 1,587.00
8 United Utilities Group Plc +0.73% +7.20 988.20
9 Severn Trent Plc +0.65% +17.00 2,621.00
10 Tesco Plc +0.63% +1.70 269.60


Top 10 FTSE 100 Fallers

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# Name Change Pct Change Cur Price
1 International Consolidated Airlines Group S.a. -3.29% -6.02 176.90
2 Pearson Plc -3.29% -20.40 600.00
3 Easyjet Plc -2.95% -19.00 625.20
4 Informa Plc -2.80% -15.40 534.00
5 Carnival Plc -2.68% -43.20 1,567.60
6 Compass Group Plc -2.11% -31.50 1,458.50
7 Burberry Group Plc -1.87% -35.00 1,837.50
8 Smurfit Kappa Group Plc -1.86% -70.00 3,689.00
9 Marks And Spencer Group Plc -1.47% -2.70 181.50
10 Whitbread Plc -1.28% -43.00 3,326.00


Europe open: Shares lower on weak China data; THG shares climb

European shares opened lower on Monday, as weak economic data from China fuelled worried about the pace of the post-pandemic recovery.

The pan-European Stoxx 600 index was down 0.48% in early, with all major regional bourses lower.

Asian markets fell after data showed China’s economy grew 4.9% in the third quarter – its slowest pace of growth in a year – hit by power shortages, supply chain problems, spreading Covid infections and jitters over the stability of the property market driven by China Evergrande’s debt repayment problems.

China-exposed luxury stocks LVMH and Kering both fell more than 3% after Chinese President Xi Jinping’s call to expand a consumption tax.

“At the beginning of this year, it was widely expected that the Chinese economy would see annual GDP growth of around 6%, a number at the time which was thought to be somewhat on the pessimistic side. As it turns out this now looks a little too optimistic, given the sharp slowdown we’ve seen in this morning’s Q3 numbers,” said CMC Markets analyst Michael Hewson.

“It’s not hard to understand why this morning’s Q3 GDP has disappointed with the various port disruptions seen throughout the quarter due to covid restrictions, supply chain issues, as well as surging power costs and enforced shutdowns of the Chinese economy.”

“The performance of the economy hasn’t been helped by the various crackdowns by Chinese authorities on various parts of the economy, as well as the problems around Evergrande and the property sector.”

UK online retailer THG gained 3% after saying it would remove its founder’s “golden share” and seek a premium listing after its shares plummeted by more than a third last week.


Monday newspaper round-up: Ford, Amazon, online sales tax

Ford has announced it will invest £230m in a Merseyside transmission factory to upgrade it to make parts for electric vehicles, in a significant fillip for northern England’s automotive industry. The US carmaker’s investment will help maintain about 500 jobs at the plant in Halewood, Knowsley, which currently makes transmission systems for petrol and diesel vehicles. Ford will receive UK government support worth about £30m, according to a source with knowledge of negotiations. – Guardian

Amazon is offering signing-up bonuses of up to £3,000 in areas of Britain with labour shortages, to attract workers in time for the Christmas surge in demand. The Food and Drink Federation says there is a “battle for labour” in the run-up to Christmas, with Amazon trying to recruit 20,000 temporary staff. Many food and hospitality firms cannot compete with the pay now being offered by the online giant and this may affect Christmas deliveries and supplies. – Guardian

Rishi Sunak is stepping up plans for an online sales tax to level the playing field between tech behemoths and high street retailers after delaying an overhaul of business rates. Treasury officials have accelerated work on a new e-commerce tax in the past few weeks and are scoping out details of a potential levy, including what goods and services will be covered, sources told The Daily Telegraph. – Telegraph

A battery storage developer spun out of the University of Sydney plans to list in London to raise more than £16m to commercialise its technology. Australia-based Gelion Technologies is expected to be valued at around £120m when it floats on Aim next month, having already raised cash from investors including Regal Funds Management and Elphinstone Group. – Telegraph

The restaurant group behind Quaglino’s and Coq d’Argent in London and 20 Stories in Manchester estimates that staff shortages are costing it 10 per cent of its revenues. Des Gunewardena, chairman and chief executive of D&D London, said the company’s workforce of 1,700 UK staff was already about 100 to 150 short and the problem would become more serious as Christmas approached. – The Times


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