London pre-open: Stocks seen lower on weak US, Asian cues

by | Sep 7, 2023

(Sharecast News) – London stocks were set to fall at the open on Thursday following downbeat US and Asian sessions.
The FTSE 100 was called to open 18 points lower at 7,408.

CMC Markets analyst Michael Hewson said: “Earlier this morning we got another snapshot of the Chinese economy, with the latest trade numbers for August.

“Over the past few weeks China has taken several measures to help boost the prospects for its economy and has continued to do so on a piecemeal basis. From easing overseas travel restrictions to modest cuts to lending rates, recent PMIs have shown that these have had limited success.

“In July, the economy slipped into deflation after headline CPI fell from 0.2% in June to -0.3%. PPI, which has been in deflation since the end of last year improved slightly but still declined by 4.4%, with the latest inflation numbers for August due this weekend.

“This morning’s trade numbers for August did show an improvement on the July figures but given how poor these were it was a low bar.

“Imports declined by 8.8%, an improvement on the 12.4% decline in July, while exports fell 7.3%, which was a significant improvement on the 14.5% seen in July. While this is encouraging, demand for Chinese goods was still weak from an international, as well as domestic perspective.”

On home turf, investors were mulling the latest data from Halifax, which showed that annual house prices fell 4.6% in August – the biggest year-on-year drop since 2009 – following a 2.5% decline in July, amid rising mortgage costs.

On the month, house prices were down 1.2% in August following a 0.4% dip a month earlier.

Halifax said a typical UK home now costs £279,569, down by around £14,000 over the last year and back to the level seen in early 2022.

Kim Kinnaird, Director, Halifax Mortgages, said: “Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July. While these did ease last month, rates remain much higher compared to recent years. This may well have prompted prospective buyers to defer transactions in the hope of some stability, and greater clarity on the future direction of rates in the coming months.

“The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years.”

In corporate news, insurance group Beazley said it remains on track to hit guidance after delivering record profits in the first half, though its combined ratio jumped.

Pre-tax profit totalled $366.4m in the six months to 30 June, up only slightly from $364.9m a year earlier, despite insurance written premiums rising 13% to $2.92bn. The discounted combined ratio, a key measure of profitability, increased to 84% from 71%.

British American Tobacco said it had finally signed a deal to sell its Russian and Belarusian businesses to a consortium led by local management.

The owner of Lucky Strike and Dunhill brands announced last year that the ownership of its operations in Russia “was no longer sustainable in the current environment” after Moscow’s unprovoked invasion of Ukraine.

Post completion of the deal the two businesses will be known as the ITMS Group. BAT did not provide any financial details, but maintained guidance for the full year and said it was confident of meeting expectations after the sale.

Synthomer reported a 12.5% decline in first-half revenues to £1.08bn, and a drop in EBITDA and underlying operating profit of 55.8% and 81.3%, respectively.

Despite challenging macroeconomic conditions, the FTSE 250 firm said its specialty businesses sustained performance with improved volumes, particularly in coatings and construction solutions.

To strengthen its financial position, Synthomer announced a £276m rights issue, managed to divest multiple businesses, and implemented cash management and savings initiatives, aiming to achieve £20m in self-help measures by the second half.

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