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London midday: Stocks turn lower as AstraZeneca slides; Mondi surges

(Sharecast News) - London stocks had turned lower by midday on Thursday, giving up earlier gains as AstraZeneca slid after results. The FTSE 100 was down 0.2% at 7,616.34.

Investors were mulling the latest data out of China, which showed that deflation accelerated at its fastest pace in 15 years in January, as weak demand continued to hamper efforts to bolster the struggling economy.

The consumer price index fell 0.8% year-on-year in January, faster than the 0.5% expected. It marked the fourth straight month of declines and the biggest contraction since the 2008 financial crisis.

Food prices fell 5.9% year-on-year, with a 17% slump in pork prices a major contributor to the decline.

Susanah Streeter, head of money and markets at Hargreaves Lansdown, said: "Whie inflation is still an unruly force central banks are attempting to tame in many nations, China is grappling with its evil twin. Deflation. Prices have fallen at their steepest rate since 2009, with the consumer price index falling 0.8% compared to a year earlier. Although falling food prices, particularly pork, is partly behind the trend. This was exacerbated by sharply lower demand during the month compared to last year due to the lunar new year celebrations landing in February, but underlying weakness remains with non-food inflation falling back.

"China is still mired in a property slump, affecting wealth perceptions and making consumers more cautious about spending big. Small stimulus measures aimed at increasing trading activity and lending into the economy have helped revive the Chinese stock market this week, but these are likely to be sticking plasters rather than a longer-term treatment for sluggish economy."

In equity markets, AstraZeneca slumped after it delivered a 6% increase in sales in 2023 despite a $3.7bn decline in Covid-19 medicines revenues, as it guided to a strong pick-up in growth this year, but profits came in slightly below analysts' forecasts.

Digital 9 Infrastructure was also sharply lower after the Icelandic authorities opened an investigation into its proposed sale of Verne Global.

On the upside, packaging company DS Smith surged after confirming it has received "a highly preliminary expression of interest" from rival Mondi.

""The board of DS Smith understands that Mondi is considering a possible offer for DS Smith although no proposal has been received at this stage," it said in a brief statement.

Peer Smurfit Kappa also racked up strong gains.

British American Tobacco was in the black despite saying it swung to a full-year loss mainly due to an impairment charge related to its US business, as investors cheered the fact it hit its targets on new categories sooner than expected.

In its preliminary results for the year to the end of December 2023, the company said it swung to a reported loss from operations of £15.75bn from a profit of £10.52bn the year before, impacted by a £27.6bn non-cash impairment charge mainly related to the US business.

BAT said revenues ticked up 1.6% to £27.28bn, with revenue from new categories up 15.6% at £3.35bn. This was driven by Vuse and Velo, it said, with revenue from non-combustibles now making up 16.5% of group revenue.

Russ Mould, investment director at AJ Bell, said: "Usually, a company announcing losses running into the tens of billions of pounds wouldn't be cause for celebration among investors. However, British American Tobacco has done just that this morning and been rewarded with share price gains.

"The impairments which have tipped British American Tobacco into a mega loss are non-cash items, relating to a write-down of the value of its acquisition of the part of Reynolds American it did not already own in 2017. While the size of the write-down has grown slightly, it was previously flagged in December.

"There was also a nugget of good news in today's results for the market to latch on to - the company has hit profitability with its 'new categories' products.

"These include its big vaping brands Vuse and Velo and these 'new categories' sales are seen as the company's answer to declining levels of cigarette smoking in the West."

Unilever advanced after the consumer goods giant announced a €1.5bn share buyback as it reported a return to volume growth in the final quarter of 2023 and said it expected a "modest improvement" in operating margin this year as prices eased.

Catering giant Compass was up after saying it delivered a strong start to its financial year with organic revenue growth currently running ahead of full-year guidance.

Babcock shot higher as JPMorgan lifted its price target on the shares to 630p from 610p as it upped its earnings per share estimates following the company's capital markets day.

Watches of Switzerland gained as it backed its full-year guidance but reported a dip in third-quarter revenues as it said consumers in the UK and Europe were choosing to spend their disposable income on other categories such as fashion and beauty.

Market Movers

FTSE 100 (UKX) 7,616.34 -0.16% FTSE 250 (MCX) 19,188.08 0.44% techMARK (TASX) 4,414.67 0.00%

FTSE 100 - Risers

Smith (DS) (SMDS) 312.20p 11.06% British American Tobacco (BATS) 2,475.00p 6.73% Smurfit Kappa Group (CDI) (SKG) 3,170.00p 6.66% Compass Group (CPG) 2,214.00p 2.98% Unilever (ULVR) 4,004.50p 2.64% Ocado Group (OCDO) 532.80p 2.30% Admiral Group (ADM) 2,536.00p 1.89% 3i Group (III) 2,374.00p 1.71% Diploma (DPLM) 3,340.00p 1.52% Flutter Entertainment (DI) (FLTR) 16,740.00p 1.52%

FTSE 100 - Fallers

AstraZeneca (AZN) 9,838.00p -6.22% JD Sports Fashion (JD.) 104.50p -2.65% Mondi (MNDI) 1,349.50p -2.28% Persimmon (PSN) 1,406.50p -2.26% SSE (SSE) 1,621.00p -1.94% Standard Chartered (STAN) 582.60p -1.89% Barratt Developments (BDEV) 493.40p -1.52% Marks & Spencer Group (MKS) 238.00p -1.24% Burberry Group (BRBY) 1,276.50p -1.24% Centrica (CNA) 133.55p -1.22%

FTSE 250 - Risers

Babcock International Group (BAB) 446.40p 5.23% Ashmore Group (ASHM) 222.40p 5.20% Me Group International (MEGP) 135.20p 4.81% Future (FUTR) 686.50p 3.23% Genus (GNS) 2,220.00p 3.06% Apax Global Alpha Limited (APAX) 157.00p 3.02% AJ Bell (AJB) 326.60p 2.90% Lancashire Holdings Limited (LRE) 637.00p 2.74% Spirent Communications (SPT) 118.70p 2.68% Renishaw (RSW) 4,144.00p 2.57%

FTSE 250 - Fallers

Aberforth Smaller Companies Trust (ASL) 1,310.00p -2.38% Marshalls (MSLH) 283.20p -1.94% Bluefield Solar Income Fund Limited (BSIF) 107.00p -1.83% GCP Infrastructure Investments Ltd (GCP) 70.50p -1.67% Close Brothers Group (CBG) 472.40p -1.34% Aston Martin Lagonda Global Holdings (AML) 171.80p -1.26% Barr (A.G.) (BAG) 546.00p -1.09% PureTech Health (PRTC) 184.80p -0.96% Bellevue Healthcare Trust (Red) (BBH) 151.00p -0.92% Bellway (BWY) 2,806.00p -0.92%

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