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London open: Stocks flat as Evergrande shares suspended
London stocks were steady in early trade on Thursday as the suspension of Evergrande shares weighed on sentiment.
At 0830 BST, the FTSE 100 was flat at 7,595.25.
Earlier in the day, shares in embattled Chinese property firm Evergrande were suspended from the Hong Kong Stock Exchange. No explanation was given, but on Wednesday, Bloomberg reported that the company’s chair was under police surveillance.
Susannah Streeter, heads of money and markets at Hargreaves Lansdown, said: “Confidence in the company has hit rock bottom as it has tried to grapple for survival, weighed down by its mountain of debt It has been trying to reach a deal with creditors, but attempts to restructure its debts have hit the buffers due to official investigations into other workings of the vast company.
“Attempts by authorities to breathe new life into the crisis-hit property sector haven’t failed to revive its fortunes. With the chairman now reported to be under police surveillance, and with no viable solutions in sight for its multitude of problems, liquidation looks increasingly likely. Given the size of the company, if all its operations are halted and a fire sale of its assets takes place, stopping contagion spreading into other sectors would prove highly difficult.”
In equity markets, BP and Shell were among the risers as oil prices jumped after the latest Energy Information Administration report showed that US commercial crude oil inventories declined by 2.2m barrels on the week.
Streeter said: “Brent Crude has swept past $97 a barrel as the effect of Saudi Arabia and Russia’s extended production cuts takes hold and data shows a faster than expected drawdown of crude stocks in the United States. Despite slowing economies in Europe and fragility in China, global demand for oil for now continues to ramp up, to meet the seemingly insatiable needs for transportation, power generation and other petrochemical activities.”
Diageo edged higher after saying it remains well positioned to deliver on its guidance, despite ongoing cost pressures and macroeconomic uncertainty.
Pub and restaurant chain Mitchells & Butlers also gained after saying it expects full-year earnings to be at the top end of expectations after a strong rise in sales and easing of cost headwinds. The company said strong trading had continued through the fourth quarter, bringing year to date like-for-like sales growth to 9.1%, with total sales growth now of 10.5%.
Elsewhere, Babcock surged as the defence contractor backed its full-year expectations, saying that trading since the start of the financial year has been “encouraging”.
On the downside, Phoenix Group, British American Tobacco, Barratt Developments, M&G and Rightmove all lost ground as they traded without entitlement to the dividend.
888 tanked after the gambling group said it expects revenue for the third quarter to fall by around 10% to £400m.
Digital9 Infrastructure tumbled as it scrapped its second-quarter dividend after a tough first half and said it swung to a loss of 6.63p per share in the six months to 30 June, compared with earnings of 3.43p a year earlier.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Crh Plc | +1.69% | +76.00 | 4,570.00 |
| 2 |  |
Bhp Group Limited | +0.57% | +13.00 | 2,311.00 |
| 3 |  |
Ferguson Plc | +0.38% | +50.00 | 13,320.00 |
| 4 |  |
Bp Plc | +0.22% | +1.20 | 539.70 |
| 5 |  |
Centrica Plc | +0.06% | +0.10 | 157.85 |
| 6 |  |
Shell Plc | +0.04% | +1.00 | 2,630.50 |
| 7 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 8 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 9 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 10 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Barratt Developments Plc | -6.30% | -29.50 | 438.90 |
| 2 |  |
Phoenix Group Holdings Plc | -6.18% | -31.40 | 476.40 |
| 3 |  |
Ocado Group Plc | -3.77% | -23.20 | 591.80 |
| 4 |  |
British American Tobacco Plc | -3.35% | -88.00 | 2,536.50 |
| 5 |  |
Flutter Entertainment Plc | -3.33% | -455.00 | 13,190.00 |
| 6 |  |
Croda International Plc | -3.07% | -144.00 | 4,547.00 |
| 7 |  |
International Consolidated Airlines Group S.a. | -2.76% | -4.10 | 144.55 |
| 8 |  |
Smurfit Kappa Group Plc | -2.72% | -74.00 | 2,650.00 |
| 9 |  |
Bt Group Plc | -2.51% | -2.95 | 114.35 |
| 10 |  |
Rolls-royce Holdings Plc | -2.33% | -5.10 | 213.70 |
US close: Stocks finish mixed as markets await inflation data
US stocks closed mixed on Wednesday, with the ‘good-news-is-bad-news’ approach dominating market sentiment as durable-goods orders came in much higher than expected.
Meanwhile, the very real prospect of a government shutdown next week was looming large, which may only exacerbate the economic crisis as the Federal Reserve sticks to its hawkish stance over monetary policy.
The Dow Jones Industrial Average finished down 0.2% at 33,550, the S&P 500 was flat at 4,275, while the Nasdaq gained 0.2% to 13,093.
“Day in and day out, the ongoing reality of higher-for-longer interest rates sets in deeper as the Fed’s messaging strengthens on ‘The Street’,” said Stephen Innes, managing partner at SPI Asset Management. “Gone are the days when the market was pricing in rate cuts in the relatively near future. […] the market is now not pricing in a full Fed rate cut until the end of next year.”
US durable-goods orders registered a surprise increase of 0.2% in August, helped by a rise in defence spending, after a revised 5.6% drop the previous month. Analysts had pencilled in a 0.5% decline. Meanwhile, core orders, which exclude defence and transportation, jumped 0.9%.
Bond yields retreated after their recent surge, with the interest rate on a 10-year Treasury passing the 4.6% mark for the first time in 16 years.
Innes explained that the forward earnings yield on the S&P 500 sits around the 5.5% level, and so the roughly 90 basis-point difference between this and the yield on a 10-year US Treasury is at its lowest since the early-2000s. “The days of easy buy-and-hold markets based on the luscious 3-to-6 ppt spreads above Treasuries in the post-financial crisis era look gone, and a regime change for valuations is obviously well underway,” he said.
Markets will now be closely watching Friday’s personal consumption expenditure price index release, with the annual rate of inflation expected to pick up to 3.5% in August from 3.3% in July, with prices forecast to have risen 0.5% over the month.
“Any result below this threshold is poised to invigorate the markets and restore confidence,” said Lane Clark, co-founder of TPP Global.
Entertainment and media stocks in focus
Entertainment stocks finished mixed despite the news that Hollywood writers returned to work for the first time in five months, after the Writers Guild of America agreed a tentative deal with major studios, streaming services and networks.
Disney, AMC and Netflix all finished in the red, while Paramount and Warner Bros gained.
Costco rose strongly after beating forecasts with its fourth-quarter results, which revealed an 8% rise in memberships for the wholesale retailer.
Broker comments were moving a bunch of stocks on Wednesday: Levi Strauss was in favour after TD Cowen started coverage with an ‘outperform’; Guardant Health was lifted by an upgrade by Piper Sandler to ‘overweight’; while Kosmos Energy jumped after Bank of America analysts raised their rating to ‘buy’.
Thursday newspaper round-up: Evergrande, blackouts, Ryanair
Embattled Chinese property giant Evergrande has suspended share trading on the Hong Kong stock exchange only a month after it resumed trading after a 17-month suspension. Trading in its two other units – the property services and electric vehicle groups – also stopped at 9am on Thursday, according to notices posted by the stock exchange. – Guardian
The risk of blackouts in Great Britain will be lower this winter thanks to higher gas storage levels in Europe and more nuclear power imported from France, the company responsible for keeping the lights on has said. National Grid’s electricity system operator (ESO) said Britain was in a stronger position heading into the coldest months than it was a year ago when Russia’s invasion of Ukraine had left officials scrambling for backup power. – Guardian
Too much government borrowing is undermining faith in official economic forecasts, the Institute for Fiscal Studies has warned. The think tank said a raft of unexpected and expensive policies rolled out by recent Chancellors had led to a surge in the size of the state and fuelled Britain’s deficit, while also making forecasts less accurate. – Telegraph
A “whatever it takes” attitude to making money meant PwC’s Australian partners overlooked rule-breaking from “rainmaker” colleagues, a report on the firm’s leaking of confidential government tax plans has said. The report, released yesterday, criticised a concentration of power at the top, which allowed the chief executive “relatively unchecked authority”. – The Times
Ryanair’s chief executive has said British air traffic control is by far the worst in Europe, after travellers were hit by more cancellations this week due to staff sickness. Michael O’Leary criticised the UK’s air traffic control network as “by far and away the least productive, most inefficient”. – The Times
