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London open: Stocks drop after China disappointment; Vistry tanks on profit warning
London stocks fell sharply in early trade on Tuesday as investors were left disappointed by a lack of new stimulus measures from China, and with housebuilder Vistry in freefall after a profit warning.
At 0845 BST, the FTSE 100 was down 1% at 8,218.07.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said European stocks were under pressure as markets took their cues from a soft session in the US and “a major cashing out” from Chinese investors.
“After reopening from their week-long break, Chinese stocks had a wild ride, as investors continued to weigh up the impact of recent stimulus measures,” he said. “After opening over 10% higher, the large-cap Chinese stock index CSI 300 saw a big chunk of those gains dwindle as investors took the opportunity to cash out. Hong Kong’s Hang Seng index briefly dropped over 10% before recovering to a loss of around 7%.
“The key issue for investors is whether a broader range of initiatives will back up the largest stimulus package since the pandemic, and a briefing by China’s National Development and Reform Commission that failed to deliver anything new wasn’t well received.”
In equity markets, Vistry shares tumbled as the housebuilder warned on profits after underestimating build costs on nine schemes in its Southern Division. The company now expects FY24 adjusted pre-tax profit to be £80m lower, while profit for FY25 will take a hit of around £30m and £5m for FY26.
The revisions mean that adjusted pre-tax profit for FY24 is now expected to be around £350m, a hit of about 20%.
Senior also tanked after the engineering solutions provider announced that the ongoing supply and logistical challenges hitting the wider aerospace sector will have an impact on full-year results.
The company, which makes high-tech components and systems for OEM manufacturers in the aerospace, defence, land vehicle, power and energy markets, now expects aerospace results in the second half to be lower than the first due to “temporary near-term customer related headwinds”.
On the upside, Imperial Brands was the top gainer on the FTSE 100 as it beefed up its shareholder returns programme by £400m after confirming it finished the fiscal year with in-line results, with growth in both tobacco and next generation products.
Group adjusted operating profit growth over the 12 months to 30 September was “close to the middle” of the mid-single digit range guidance, the company said.
For the current fiscal year, Imperial is targeting £2.8bn of returns, up from a £2.4bn commitment in the year just gone, comprising a 13.6% enlarged share buyback plan of £1.25bn and £1.5bn in cash dividends.
Convenience food producer Greencore rallied after it lifted full-year profit guidance following a strong fourth-quarter performance.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Imperial Brands Plc | +3.54% | +76.00 | 2,224.00 |
| 2 |  |
Hammerson Plc | +0.78% | +2.40 | 308.40 |
| 3 |  |
Next Plc | +0.75% | +74.00 | 9,906.00 |
| 4 |  |
Ashtead Group Plc | +0.64% | +36.00 | 5,684.00 |
| 5 |  |
Banco Santander S.a. | +0.53% | +2.00 | 381.50 |
| 6 |  |
Reckitt Benckiser Group Plc | +0.48% | +22.00 | 4,575.00 |
| 7 |  |
Tesco Plc | +0.47% | +1.70 | 361.50 |
| 8 |  |
Marks And Spencer Group Plc | +0.33% | +1.20 | 369.00 |
| 9 |  |
Diploma Plc | +0.24% | +10.00 | 4,256.00 |
| 10 |  |
International Consolidated Airlines Group S.a. | +0.21% | +0.40 | 192.30 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Prudential Plc | -5.89% | -42.40 | 677.00 |
| 2 |  |
Antofagasta Plc | -5.80% | -115.50 | 1,875.00 |
| 3 |  |
Anglo American Plc | -5.48% | -134.00 | 2,311.00 |
| 4 |  |
Rio Tinto Plc | -4.81% | -255.00 | 5,045.00 |
| 5 |  |
Bhp Group Limited | -4.51% | -105.00 | 2,222.00 |
| 6 |  |
Bp 9% 2nd Prf | -4.24% | -7.00 | 158.00 |
| 7 |  |
Glencore Plc | -4.21% | -18.40 | 419.10 |
| 8 |  |
Hsbc Holdings Plc | -3.67% | -25.50 | 669.70 |
| 9 |  |
South32 Limited | -3.25% | -6.20 | 184.50 |
| 10 |  |
Jd Sports Fashion Plc | -2.68% | -3.60 | 130.70 |
US close: Stocks drop as investors scale back risk appetite
US stocks fell sharply on Monday with the Dow pulling back from record highs as investors adopted a cautious approach ahead of the third-quarter earnings season, while oil prices surged on the back of the ongoing conflict in the Middle East.
The Dow Jones Industrial Average declined 0.94% to 41,954.24, with just five of the index’s 30 constituents finishing in positive territory. The benchmark surged to a new closing high of 42,352.75 on Friday following a bumper jobs report for September, which showed that the American economy created significantly more jobs than expected.
Meanwhile, the S&P 500 dropped 0.96% while the Nasdaq fell 1.18%.
No major corporate earnings were slated for release on Monday, but traders were patiently awaiting the beginning of Q3 earnings season later in the week, with heavyweights PepsiCo, JPMorgan, Wells Fargo and BlackRock all set to report over the coming days.
Also dampening risk appetite were oil prices as fighting continued in the Middle East. West Texas Crude was up nearly 4% at $77.29 a barrel by the end of play, rising to levels not seen since late-August, reigniting fears about inflation.
Stephen Innes, managing partner at SPI Asset Management, said there are “real concerns that the escalating conflict could imperil Iran’s 3.4m barrels per day of production and threaten significant disruptions along the world’s key oil supply artery—the Strait of Hormuz”.
He added: “What was once a market fixated on oversupply risks is now grappling with the potential for a supply squeeze that could skyrocket prices. The stakes are high, and the geopolitical tension has traders on edge, bracing for more volatility in the coming weeks.”
Market movers
Technology and aerospace manufacturer Barnes Group rose 3% to $46.48 on the news that it has agreed to be bought by Apollo Global Management for $3.6bn in cash.
Under the terms of the agreement, Barnes shareholders will receive $47.50 per share in cash, which is a premium of about 22% the undisturbed closing share price on 25 June. The stock, which surged 13% on Friday, was trading around the $40 level at the start of last week.
Also rising on M&A news was Arcadium Lithium after Rio Tinto confirmed speculation that it has approached the Philadelphia-based lithium chemicals producer regarding a possible takeover. The stock finished up 35%.
Drugmaker giant Pfizer rose 2% on a CNBC report that activist investor Starboard Value has built a $1bn stake in the firm and is pushing for a turnaround of the company.
Tuesday newspaper round-up: Winter blackouts, Selfridges, Richemont
Ticket sales for the Oasis reunion tour helped to increase non-essential spending by British consumers to the highest level this year in September, amid a bumper month for retailers. In a sign of resilience despite a pre-budget hit to consumer confidence, industry figures show retail sales and discretionary spending on entertainment, meals out and little luxuries rose sharply last month. – Guardian
The risk of winter blackouts in Great Britain has tumbled to its lowest in four years even after the shutdown of the UK’s last coal plant, thanks to investments in low-carbon electricity sources. The National Energy System Operator (Neso) expects Britain’s winter power supplies to outstrip demand by almost 9% this year in its base case scenario, the greatest margin since the winter of 2019 to 2020. – Guardian
Britain is set to suffer the biggest exodus of millionaires in the world ahead of the Government’s planned raid on non-doms, analysis has found. The share of the population who are millionaires is expected to plunge by 20pc over the course of this Parliament, from 4.55pc now to 3.62pc over the next five years, according to an Adam Smith Institute analysis of UBS forecasts. This is in contrast to Germany, France and Italy, all of which are predicted to grow their share. – Telegraph
Saudi Arabia has struck a deal to become the junior partner in the iconic London department store Selfridges after buying out a bust Austrian property tycoon. In a tie-up with Thailand’s Central Group, a family-owned retail conglomerate, Saudi’s Public Investment Fund (PIF) has acquired a 40pc stake in Selfridges from Rene Benko’s property business Signa. Under the terms of the deal, Central will have a 60pc stake in both the property and operating businesses of Selfridges, while PIF will significantly increase its 10pc position. – Telegraph
Richemont has struck a deal to offload Yoox Net-a-Porter, its struggling online luxury business, to its German rival Mytheresa after a previous sale agreement collapsed. The Swiss luxury conglomerate, which owns Cartier and other high-end jewellery and fashion brands, had been looking to sell YNAP after a previous plan to sell it to Farfetch fell apart last December. – The Times
