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The FTSE 100 took its cue from Asia’s main markets, which once again succumbed to worries over China’s all-out assault on its home-grown tech giants.
The volatility followed a day in which a modicum of calm seemed to have been restored to the sector and after some meant-to-be soothing words from Beijing on the issue.
Here at home, the miners, so reliant on the economic fortunes of the People’s Republic, took a bashing early on with Rio Tinto (LON:RIO), down 3.2%, leading the retreat.
Top of the losers’ list was Intertek (LON:ITRK), the testing firm, after what on the face of it looked like a robust set of interims. That said, the half-time dividend was held as the group said it planned to invest in growth.
NatWest Group (LON:NWG) shares fell with the market on the day it swung into a profit and resumed its pay-out after a Covid hiatus.
“NatWest has followed in the footsteps of Barclays and Lloyds earlier this week by reporting a decent set of first-half numbers, as the unlocking of the UK economy boosts confidence, and a lot of the worst-case scenarios failed to play out,” said Michael Hewson, analyst at CMC Markets.
6.50 am: FTSE 100 called lower
UK equities are set to open lower, taking their lead from sliding Asian markets rather than US markets, which finished higher yesterday.
Spread betting quotes indicate the FTSE 100 will open 44 points lower at 7,034.
The Chinese regulators appear to have been taken aback by the reaction of the markets to various signals that a crackdown on trading is on the way and have back-pedalled a bit, issuing assurances that the measures would be targeted rather than broad-based.
After the bell yesterday results from tax and labour relations specialist Amazon.com disappointed the market.
“Revenues for Q2 came in short of expectations, while Q3 guidance was also lower than expected, although this also needs to be set into some sort of context. Revenues were still in excess of $110bn at $113bn, while sales for Q3 were expected to be equally as good. They just weren’t good enough,” declared CMC’s Michael Hewson.
Also disappointing the market was Robinhood, which saw its shares slide 8% on their market debut, despite the trading app developer pricing its initial public offering at the bottom end of the expected range at US$38 a share.
All of which took some of the shine off a decent day for US markets; the Dow Jones closed 154 points heavier at 35,085 and the S&P 500 rose 19 points to 4,419.
In Asia, red is the colour and selling is the game. Japan’s Nikkei 225 is off 450 points at 27,333 following disturbing trends in the number of COVID cases while in Hong Kong the Hang Seng is down 600 points at 25,715.
“With Mainland and Hong Kong markets enduring a torrid week on Chinese government clampdowns and restrictions, the assurances from the central government that such measures are targeted and not broad may be falling on deaf ears with investors pondering weekend event risk. All in all, it looks like investors are taking risks of the table over the weekend. With sentiment remaining fragile, despite some stabilisation yesterday, the fast-money herds don’t need much to spook them,” suggested OANDA’s Jeffrey Halley.
Closer to home, International Consolidated Airlines SA and NatWest Group are the big guns issuing updates on Friday and there’s little doubt which will sound the more optimistic.
Banking giant NatWest is issuing second-quarter results and the expectation is for an adjusted profit before tax of some £935mln and CET1 – a measure of balance street strength – of 18.1%.
The government recently indicated it would sell off another chunk of shares in the nationalised bank, which could either mean things are going well or the government is cashing in while it can.
Given the strength of the housing market and the relatively low level (so far) of loan defaults, it is probably more a case of the former.
Half-year results from British Airways owner IAG are unlikely to make for great reading as coronavirus travel restrictions continue to be a millstone around the neck of the travel industry.
However, investors will likely be hoping the easing of restrictions, albeit slightly, will lift the firm’s fortunes across the rest of the year, so the outlook statement will therefore be crucial as well as the group’s ongoing cost management.
With this in mind, analysts at UBS are predicting the focus to be on forward bookings and the impact of the UK’s traffic light system, as well as on the current rate of cash burn.
Around the markets
- Sterling: US$1.3943, down 0.18 cents
- 10-year gilt: 0.576%, down 0.25 basis points
- Gold: US$1,827.10 an ounce, down US$4.10
- Brent crude: US$74.64 a barrel, down 46 cents
- Bitcoin: US$39,730, up US$7
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were lower on Friday as Australia reported a record daily rise in COVID-19 cases despite an extended lockdown.
Australia’s military will help enforce a lockdown in Sydney after the city recorded 239 new cases.
NSW state authorities said the outbreak was likely to get worse.
The Shanghai Composite in China fell 1.14% and Hong Kong’s Hang Seng index slumped 2.35%
In Japan, the Nikkei 225 declined 1.68% while South Korea’s Kospi dipped 1.15%.
Shares in Australia slipped, with the S&P/ASX 200 trading 0.26% lower.
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