London midday: Stocks stay down after weak China data
By Josh White
Date: Monday 27 Jan 2025
(Sharecast News) - London stocks remained in negative territory by midday on Monday as investors turned their attention to a pivotal week featuring interest rate decisions from the US Federal Reserve and the European Central Bank, alongside earnings reports from several major US technology companies.
The FTSE 100 index was down 0.2% at 8,485.08 points, while the FTSE 250 declined 0.58% to 20,399.05 points.
In currency markets, sterling was last up 0.11% on the dollar to trade at $1.2498, while it edged 0.05% higher against the euro, changing hands at €1.1890.
"US markets are likely to take centre stage today as a slump in the tech sector puts pressure on wider markets," said Joshua Mahony at Scope Markets.
"This comes off the back of an announcement from Chinese tech firm Deepwater, which posted incredibly impressive results from their budget AI model which costs a fraction of the price compared with the likes of OpenAI.
"The prospect of a high-performance low-cost product provides significant question marks over the necessity of spending hundreds of billions on Nvidia chips and development going forward."
Mahony said that for markets, it was a "timely reminder" that the AI era would likely be unpredictable, just like the development of the internet.
"While many will be left questioning Nvidia's $3.5trn market cap, the potential for businesses to obtain the benefits of AI at a fraction of the cost could be good news for the wider market.
"However, this is a reminder that the huge investment undertaken by big tech over recent years may not have built them the kind of impenetrable moat against Chinese competition many had presumed."
Fresh data paints slow picture of Chinese economy
In economic news, China's activity showed signs of slowing in January, with the manufacturing sector contracting for the first time in four months and growth in the services industry losing momentum.
Official data revealed that the manufacturing purchasing managers' index (PMI) fell to 49.1 from 50.1 in December, slipping below the neutral 50-point threshold and missing analysts' expectations for stability.
Manufacturing output and new orders declined, while buying activity also weakened.
In the services sector, the non-manufacturing PMI dropped to 50.2 from the nine-month high of 52.2 recorded in December, reflecting contractions in both foreign and domestic demand.
As a result, the overall composite PMI fell to 50.1, marking its lowest level since August and falling short of market forecasts.
Closer to home, German business sentiment showed a slight improvement in January despite persistent concerns among companies.
The Ifo Institute reported that its business climate index rose to 85.1 from 84.7 in December, surpassing expectations for no change.
However, the outlook remained cautious, with the expectations index slipping marginally to 84.2 from 84.4, while the current conditions gauge edged higher to 86.1 from 85.1.
Sectoral performance was mixed, with manufacturing sentiment deteriorating further, while the service sector saw modest gains.
Trade sentiment remained weak, and construction confidence declined, reflecting broader economic challenges.
"Despite the rise in the headline BCI, the German economy is clearly still struggling," said Franziska Palmas, senior Europe economist at Capital Economics.
"The BCI was very low compared to its average level in the pre-pandemic period and at face value is consistent with a sharp contraction in GDP.
"And though the composite PMI, published on Friday, pointed to a better performance, it was still consistent with GDP stagnating."
Miners fall on China data, WH Smith in the green
On London's equity markets, shares of mining companies were still under pressure by lunchtime as the weak economic data from China weighed on sentiment.
Anglo American, Glencore, and Antofagasta were all trading lower.
Dr Martens shares edged down despite the boot maker reaffirming its full-year guidance and reporting higher revenue, driven by a solid performance in its ecommerce division.
On the upside, British American Tobacco gained after receiving an upgrade to 'buy' from UBS.
WH Smith saw strong gains after confirming it was exploring strategic options for its high street stores, including a potential sale of the unit.
The retailer highlighted its transformation into a focused global travel business, with travel retail now accounting for the majority of its revenue and profit.
Diversified Energy also advanced after announcing the acquisition of Maverick Natural Resources for $1.28bn.
The acquisition is expected to bolster the company's presence in key US energy basins, including the Permian and Western Anadarko regions.
Reporting by Josh White for Sharecast.com.
FTSE 100 - Risers
British American Tobacco (BATS) 3,136.00p 4.26%
Croda International (CRDA) 3,343.00p 3.18%
Airtel Africa (AAF) 129.60p 2.86%
Severn Trent (SVT) 2,492.00p 2.26%
Schroders (SDR) 341.00p 2.10%
Convatec Group (CTEC) 244.40p 2.09%
British Land Company (BLND) 362.60p 2.08%
GSK (GSK) 1,383.50p 1.99%
National Grid (NG.) 973.60p 1.95%
Vodafone Group (VOD) 68.30p 1.94%
FTSE 100 - Fallers
Anglo American (AAL) 2,391.00p -5.70%
Scottish Mortgage Inv Trust (SMT) 1,001.50p -5.43%
Halma (HLMA) 2,784.00p -4.40%
Rolls-Royce Holdings (RR.) 582.80p -3.76%
Ashtead Group (AHT) 5,222.00p -3.33%
CRH (CDI) (CRH) 7,892.00p -3.19%
Glencore (GLEN) 366.20p -2.45%
Flutter Entertainment (DI) (FLTR) 20,940.00p -2.29%
IMI (IMI) 1,930.00p -2.28%
F&C Investment Trust (FCIT) 1,152.00p -2.21%
FTSE 250 - Risers
W.A.G Payment Solutions (WPS) 76.00p 4.68%
Ocado Group (OCDO) 312.00p 2.94%
Supermarket Income Reit (SUPR) 67.40p 2.90%
Johnson Matthey (JMAT) 1,415.00p 2.83%
WH Smith (SMWH) 1,178.00p 2.61%
SThree (STEM) 285.50p 2.33%
Workspace Group (WKP) 442.50p 2.08%
CMC Markets (CMCX) 225.50p 2.04%
Ithaca Energy (ITH) 126.10p 1.86%
Sirius Real Estate Ltd. (SRE) 77.30p 1.78%
FTSE 250 - Fallers
Allianz Technology Trust (ATT) 413.00p -7.19%
Polar Capital Technology Trust (PCT) 355.50p -7.06%
Baillie Gifford US Growth Trust (USA) 253.00p -4.35%
Trustpilot Group (TRST) 332.00p -3.91%
JPMorgan American Inv Trust (JAM) 1,134.00p -3.90%
Edinburgh Worldwide Inv Trust (EWI) 183.80p -3.77%
Monks Inv Trust (MNKS) 1,288.00p -3.74%
Harbour Energy (HBR) 245.40p -3.42%
Paragon Banking Group (PAG) 736.00p -3.35%
BlackRock Greater Europe Inv Trust (BRGE) 582.00p -3.32%
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