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London close: Stocks still weaker after China-fuelled oil jitters

By Josh White

Date: Monday 28 Nov 2022

London close: Stocks still weaker after China-fuelled oil jitters

(Sharecast News) - London stocks closed below the waterline on Monday, as anti-lockdown protests in China rattled equity and energy markets.
The FTSE 100 ended the session down 0.17% at 7,474.02, and the FTSE 250 was 1.3% weaker at 19,292.35.

Sterling was also in the red, last sitting 0.61% lower on the dollar at $1.2018, as it weakened 0.43% against the euro to trade at €1.1583.

"European and US markets have followed their Asian counterparts lower today, with weekend unrest in China building on the Covid-fuelled uncertainty that had been growing over recent weeks," said IG senior market analyst Joshua Mahony.

"Remarkably, the World Cup seems to have inadvertently served to highlight the disparity between China and the rest of the world, with football fans from freely enjoying the tournament as the Chinese population suffer under wave-upon-wave of Covid containment measures.

"Covid quarantine measures have been blamed for 10 deaths in a Shanghai tower block, sparking a series of protests that have spread throughout the country, forming an uprising the likes of which we have not seen on mainland China since 1989."

From a market perspective, Mahony said the outcome from the protests remained uncertain, with optimists hoping that it would push president Xi Jinping to ease restrictions earlier.

"However, for now we see major uncertainty that has been reflected by market weakness, with concerns growing over a drawn-out period of restrictions thanks to growing Covid cases."

In economic news, retail sales slumped in the UK in November as consumers tightened their belts amid the cost-of-living crisis, according to the latest distributive trades survey from the Confederation of British Industry.

The CBI reported sales balance declined to -19 from +18 in October, coming in well below consensus expectations of +2.

A balance is the weighted difference between the percentage of retailers reporting an increase and those reporting a decrease.

"It's not surprising that retailers are feeling the chill as the UK continues to be buffeted by economic headwinds," said Martin Sartorius, principal economist at the CBI.

"Sales volumes fell at a firm pace in the year to November, and retailers remain notably downbeat about their future business prospects.

"This pessimism is reflected in investment intentions worsening to the greatest extent since May 2020."

Sartorius said retailers and wholesalers contribute £352bn to the UK economy, and support a fifth of the nation's jobs, but the survey results underlined the "tough time" the sector was currently having.

"The chancellor's decision to back CBI calls for a freeze in business rates next April will provide some welcome relief, but retailers are also looking for longer-term measures from the government that can restore momentum to the UK economy.

"Businesses stand ready to work with the government to implement a serious plan for growth that can lift us all out of the current crisis."

Retail footfall meanwhile rose in the week ended 26 November, according to Springboard, but still remained sharply below pre-pandemic levels.

Footfall across UK retail destinations increased by 3.2% week-on-week, with footfall across shopping centres rising 5.2%, while high streets and retail parks registered 2.3% and 2.7% upticks, respectively.

On Black Friday, shopping centres had a rise in footfall of 16.8%, while high street and retail park footfall rose 11.3% and 7.1%, respectively.

However, despite the uplift in footfall, the gap from 2019 was still down 14.1% for the week and 17.5% for Black Friday.

By Saturday, footfall across all UK destinations registered a rise of just 0.6% from the week before, while Sunday saw a rise of 5.9% overall.

"UK retail destinations received a boost last week from Black Friday, with an increase in footfall from the week before that was twice as large as in the previous week," said Springboard's Diane Wehrle.

"Footfall rose in all three destination types, but shopping centres fared particularly well, which is a result we would expect to see as shopping centres comprise a critical mass of larger retailers, the vast majority of which actively participate in the event.

"However, notably footfall still remained significantly lower than pre-pandemic levels, indicating consistent nervousness around spending in the current climate."

Elsewhere in data, house price inflation slowed last month according to fresh industry data, as demand slumped following the mini-budget and homeowners cut asking prices to secure sales.

Property marketing portal Zoopla said annual house price growth slowed to 7.8% in October, the slowest since November 2021, while one in 10 homes had a price reduction of 5% since September.

Buyer demand was also lower, down 44% year-on-year, while sales fell 28%.

Looking ahead to next year, Zoopla forecast mortgage rates - which jumped in response to the disastrous mini-budget on 23 September - were likely to start 2023 at 5%.

It was also expecting volumes to drop back to one million over the course of the year, from 1.3 million in 2022, and for house prices falls of up to 5% in high-value markets sensitive to higher borrowing costs.

"While the outlook for house prices is weak, we see a shift to more needs-driven motivations to move in 2023 and beyond, which support sales volumes," said Richard Donnell, Zoopla executive director.

"Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves.

"Cost-of-living pressures will compound these trends, encouraging home owners to consider their next move."

On the continent, money supply growth in the eurozone decelerated sharply last month, possibly signalling a further downturn in euro area purchasing managers' surveys.

According to the European Central Bank, the annual rate of growth in the M3 money supply aggregate fell back to 5.1% in October, from 6.3% for September.

Economists had been anticipating a dip to 6.2%.

Pantheon Macroeconomics' senior European economist Melanie Debono said eliminating the impact of a one-off factor that boosted September's reading, then M2 slowed to 5.8%, which still marked a hefty slowdown.

"And the components suggest the downturn in EZ activity will continue to intensify, unlike the green shoots in the business surveys," she noted.

Sentiment began the global day depressed by a fall in oil prices, as rare social unrest in China weighed heavily on both equities and commodities.

Prices for the thick black stuff had started to recover by the end of trading in London, however, with Brent crude futures last up 0.14% on ICE at $83.75 per barrel, and the NYMEX quote for West Texas Intermediate rising 1.34% to $77.30.

China saw a wave of demonstrations over the weekend, after tens of thousands took to the streets in a number of cities, including Shanghai, Beijing and Wuhan, over strict Covid-19 controls.

The surprise outbreak of civil disobedience - a rare sight in mainland China - saw the Hang Seng Index close sharply lower on Monday, and the renminbi lose ground against the dollar.

"Oil prices are trading sharply lower, after protests sparked concerns about weakening demand from the world's largest economy," noted Victoria Scholar, head of investment at Interactive Investor, earlier in the day.

On London's equity markets, oil giants BP and Shell were still in the red by the close, slipping 0.98% and 0.27%, respectively.

Housebuilder Persimmon fell 3.69% after a downgrade to 'sell' at UBS, with the sector more broadly weaker after the Zoopla release earlier.

Barratt Developments was down 1.87%, Berkeley Group lost 1.82%, Redrow slipped 1.34%, and Taylor Wimpey was 1.87% weaker.

BT Group lost 2.44% after a report that the telecoms giant was preparing to merge two of its struggling divisions serving corporate clients, as it looked to cut costs.

According to the Telegraph, the company was poised to combine its global services division with its enterprise unit.

Property company Home REIT tumbled 7.04% after saying late on Friday that it was delaying the release of its full-year results following a note by Viceroy Research.

The Delaware-based firm last week questioned the valuation of Home's properties, and its tenants' ability to pay rent.

Abrdn was knocked 3.45% lower by a downgrade to 'sell' at Redburn, while Watches of Switzerland Group slid 4.3% after a downgrade to 'neutral' at Goldman Sachs.

Car dealership Inchcape fell 3.92% after it said that chief financial officer Gijsbert de Zoeten had voluntarily tendered his resignation, and would be standing down immediately.

"This follows an incident at a recent event where, through a lapse in judgement, he displayed personal behaviour falling short of the high standards expected of the leadership of the group," Inchcape said in its statement.

On the upside, Just Group gained 2.27% after an initiation at 'buy' at Jefferies.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,474.02 -0.17%
FTSE 250 (MCX) 19,292.35 -1.30%
techMARK (TASX) 4,425.55 -0.15%

FTSE 100 - Risers

Pershing Square Holdings Ltd NPV (PSH) 2,955.00p 1.37%
Flutter Entertainment (CDI) (FLTR) 11,945.00p 1.27%
Reckitt Benckiser Group (RKT) 5,968.00p 1.15%
Pearson (PSON) 990.20p 1.14%
Unilever (ULVR) 4,155.00p 1.01%
Centrica (CNA) 94.82p 0.94%
AstraZeneca (AZN) 11,050.00p 0.88%
Glencore (GLEN) 538.30p 0.84%
Frasers Group (FRAS) 894.00p 0.68%
Diageo (DGE) 3,786.00p 0.62%

FTSE 100 - Fallers

Admiral Group (ADM) 2,034.00p -4.42%
Persimmon (PSN) 1,279.50p -3.69%
Melrose Industries (MRO) 130.20p -3.42%
Ocado Group (OCDO) 633.20p -2.46%
Rolls-Royce Holdings (RR.) 88.62p -2.45%
BT Group (BT.A) 123.80p -2.44%
Intermediate Capital Group (ICP) 1,202.50p -2.39%
Kingfisher (KGF) 242.80p -1.98%
Taylor Wimpey (TW.) 102.05p -1.87%
Barratt Developments (BDEV) 399.90p -1.87%

FTSE 250 - Risers

Vietnam Enterprise Investments (DI) (VEIL) 563.00p 3.30%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 422.00p 2.93%
Just Group (JUST) 74.45p 2.27%
Johnson Matthey (JMAT) 2,128.00p 1.77%
Hilton Food Group (HFG) 544.00p 1.68%
Supermarket Income Reit (SUPR) 107.50p 1.42%
Spirent Communications (SPT) 286.20p 1.20%
AJ Bell (AJB) 365.20p 0.94%
TBC Bank Group (TBCG) 2,200.00p 0.92%
Finsbury Growth & Income Trust (FGT) 868.00p 0.81%

FTSE 250 - Fallers

Home Reit (HOME) 55.50p -7.04%
Dr. Martens (DOCS) 193.10p -6.98%
Future (FUTR) 1,455.00p -5.89%
Syncona Limited NPV (SYNC) 175.20p -5.19%
Travis Perkins (TPK) 939.40p -4.57%
Caledonia Investments (CLDN) 3,870.00p -4.33%
Watches of Switzerland Group (WOSG) 980.00p -4.30%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,315.00p -4.13%
Molten Ventures (GROW) 395.20p -4.08%
Synthomer (SYNT) 141.70p -4.06%

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