London close: Stocks turn weaker on fresh geopolitical tensions

(Sharecast News) - London stocks turned negative by the end of trading on Monday, as geopolitical jitters around China and Taiwan spooked investors in late trading. The FTSE 100 ended the session down 0.13% at 7,413.42, and the FTSE 250 was off 0.42% at 20,079.23.

Sterling was in positive territory, meanwhile, last trading up 0.87% on the dollar at $1.2277, and strengthening 0.37% against the euro to €1.1958.

"European markets have fallen back from their intraday highs on reports that US House Speaker Nancy Pelosi would be landing in Taiwan tomorrow evening in defiance of Chinese warnings not to do so," said CMC Markets chief market analyst Michael Hewson.

"This raising of tensions presents a bit of a problem for the US, especially given Russia's aggressive behaviour in Ukraine.

"It will be enormously difficult for the US not to proceed with this visit, despite Chinese displeasure, as to not do so would send the wrong message and give China encouragement to push its luck further out when it comes to its military activities in the Asia region."

In economic news, factory activity in the UK grew at its slowest pace of the past 25 months in July, as output shrank for the first time in more than two years and new work intakes and new export business fell further alongside.

S&P Global's manufacturing purchasing managers' index for July was revised down from a preliminary print of 52.2 to a reading of 52.1.

That was below a June reading of 52.8 and a consensus forecast of 52.2.

Rob Dobson, director at S&P Global Market Intelligence, noted that new order intakes had registered their first back-to-back monthly declines for two years.

"Rising market uncertainty, the cost of living crisis, war in Ukraine, ongoing supply issues and inflationary pressures are all hitting demand for goods at the same time, while lingering post-Brexit issues and the darkening global economic backdrop are hampering exports," Dobson said.

"With the Bank of England implementing further interest rate hikes to combat inflation, the outlook is beset with downside risks.

"With this in mind, the continued low degree of optimism among manufacturers is of little surprise."

Across the channel, eurozone manufacturing activity contracted in July as weak demand saw inventories building.

The S&P Global final manufacturing PMI fell to 49.8 in July from 52.1 in June and - ahead of a preliminary reading of 49.6

It was the first time below the 50 mark that separates growth from contraction since June 2020.

"Eurozone manufacturing is sinking into an increasingly steep downturn, adding to the region's recession risks," said S&P Global chief business economist Chris Williamson.

"New orders are already falling at a pace which, excluding pandemic lockdown months, is the sharpest since the debt crisis in 2012, with worse likely to come.

"Lower than anticipated sales, reflected in accelerating rates of decline of new orders and exports, have led to the largest rise in unsold stocks of finished goods ever recorded by the survey."

Turning stateside, factory sector activity in the US held up better than expected last month, with the Institute for Supply Management's manufacturing PMI dipping to 52.8 in July from a reading of 53.0 for June, against consensus expectations for 52.1.

Andrew Hunter, senior US economist at Capital Economics, said the data was consistent with third quarter US GDP growth of around 1.5%.

However, the underlying details, such as the declines in the sub-index for output and that for new orders, were "a bit more concerning" than the headline PMI figure, he added.

"Overall, the activity components of the survey suggest that the nascent manufacturing downturn has further to run, as weak global growth and the stronger dollar take their toll, but they aren't yet signalling a severe downturn in the wider economy.

"While we expect strong services inflation to keep the Fed hiking rates over the rest of this year, the sharp fall in the ISM prices index, to 60.0 in July from 78.5, suggests core goods inflation is set to slow quite sharply."

Finally on data, activity in China's factory sector continued to improve last month after Covid-19 containment measures were eased, but much more slowly than anticipated.

Caixin's China manufacturing PMI retreated to 50.4 in July from a reading of 51.7 for June, falling short of forecasts for 51.5.

"Major macroeconomic indicators in the second quarter showed that the adverse impact of the latest round of Covid outbreaks on the economy is fading. The third quarter will therefore be a crucial period to get the economy back on track," said Dr Wang Zhe, senior economist at Caixin.

"As the authorities have made it clear that no ultra-massive stimulative measures would be forthcoming, effective implementation of existing policies is a more practical option.

"Moreover, the labour market remained under pressure and the financial situation of low-income groups deteriorated."

On London's equity markets, publisher Pearson jumped 12.69% after it delivered a "strong financial performance" in the six months ended 30 June, leading it to reiterate its guidance for the full year.

Pearson said underlying sales grew 6% to £1.78bn during the first half of the year, while adjusted operating profits surged £33.0m to £160.0m, primarily driven by an "encouraging" trading performance, foreign exchange benefits and property savings.

HSBC added 6.13% after reporting a fall in first-half profits on Monday, but pledging to resume quarterly dividends next year as its annual outlook remained positive.

The banking giant posted a pre-tax profit of $9.17bn, down more than 15% year-on-year, despite reporting a modest 2% uptick in interim revenues to $12.8bn.

Elsewhere, shares in Quilter rocketed 14.57% after reports that NatWest Group was in the early stages of studying a bid for the wealth management firm.

Private equity firms including CVC, Bain Capital and BC Partners had also reportedly expressed interest in the FTSE 250 firm.

Quilter, with a value of £1.4bn, was said to be one of many wealth management firms that lacked the scale and investment needed to compete with larger players and banks, according to the Mail on Sunday.

On the downside, food producer Cranswick lost 2.4% despite reporting 7.4% growth in revenues for the 13 weeks ended 25 June.

It said like-for-like revenues were 5.8% higher, with strong growth in its core UK market partly offset by expected lower export revenue.

Far East export sales were lower than in the same quarter a year earlier, however, due to market prices falling from elevated levels experienced over the previous two years.

RHI Magnesita was 8.44% lower despite reporting a 33% improvement in first-half revenue on Monday, to €1.59bn (£1.33bn), and by 25% in constant currency terms.

The FTSE 250 company said adjusted EBITA increased 47% year-on-year for the six months ended 30 June to €188m, or by 38% at constant exchange rates.

XP Power tumbled 14.8% after it revealed that lower production volumes and inflation had crimped revenue growth for the half-year.

Information, analytics and e-commerce services company Ascential lost 15.62% after it reported first-half results in line with market expectations on Monday, with revenue rising to £260.7m from £154.3m, although its reported losses widened.

Reporting by Josh White at Sharecast.com. Additional reporting by Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,413.42 -0.13% FTSE 250 (MCX) 20,079.23 -0.42% techMARK (TASX) 4,355.63 -0.50%

FTSE 100 - Risers

Pearson (PSON) 852.60p 12.69% HSBC Holdings (HSBA) 545.20p 6.13% Ocado Group (OCDO) 876.00p 4.36% Avast (AVST) 480.00p 3.23% Auto Trader Group (AUTO) 646.20p 2.64% Rightmove (RMV) 654.60p 2.35% BAE Systems (BA.) 787.00p 2.21% Compass Group (CPG) 1,947.50p 1.72% Barclays (BARC) 159.80p 1.67% Scottish Mortgage Inv Trust (SMT) 875.00p 1.51%

FTSE 100 - Fallers

Melrose Industries (MRO) 151.80p -5.45% Anglo American (AAL) 2,832.50p -3.98% Intertek Group (ITRK) 4,231.00p -3.31% Prudential (PRU) 973.60p -3.22% International Consolidated Airlines Group SA (CDI) (IAG) 116.14p -2.19% Shell (SHEL) 2,136.00p -1.97% GSK (GSK) 1,693.80p -1.96% BP (BP.) 392.35p -1.91% Harbour Energy (HBR) 359.20p -1.91% Smiths Group (SMIN) 1,516.50p -1.69%

FTSE 250 - Risers

Quilter (QLT) 120.30p 14.57% Jupiter Fund Management (JUP) 130.80p 4.31% Aston Martin Lagonda Global Holdings (AML) 490.00p 3.20% Rathbones Group (RAT) 1,866.00p 3.09% Currys (CURY) 68.40p 2.70% Babcock International Group (BAB) 351.40p 2.63% Polymetal International (POLY) 200.00p 2.56% Network International Holdings (NETW) 205.80p 2.49% JPMorgan Japanese Inv Trust (JFJ) 496.00p 2.48% Mitchells & Butlers (MAB) 177.50p 2.42%

FTSE 250 - Fallers

Ascential (ASCL) 246.40p -15.62% XP Power Ltd. (DI) (XPP) 2,575.00p -14.80% RHI Magnesita N.V. (DI) (RHIM) 2,062.00p -8.44% Spectris (SXS) 2,934.00p -5.63% ICG Enterprise Trust (ICGT) 1,114.00p -4.46% Vesuvius (VSVS) 344.80p -4.17% Syncona Limited NPV (SYNC) 198.00p -3.88% IMI (IMI) 1,285.00p -3.75% Petrofac Ltd. (PFC) 111.30p -3.39% Ferrexpo (FXPO) 143.10p -3.38%