Stock Market News (European Open) – Equity rally takes a breather; miners remain under pressure – XM (blog)


Andreas Georgiou, XM Investment Research Desk

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The rally in stocks earlier in the week, effectively on Monday and Tuesday, was not sustained mid-week. The Nikkei 225 and the broader Japanese index, the Topix, both contracted by 0.3% after rising in the three preceding days. Hong Kong’s Hang Seng built on yesterday’s decline to finish the day lower by 0.4%. The Shanghai Composite was down by a similar proportion and Australia’s S&P/ASX 200 edged lower by 0.1%.

Further dampening risk sentiment today were Chinese data on fixed asset investment, industrial production and retail sales for August, all surprising to the downside. Though it should be mentioned that figures for all three still grew at considerable rates. The news acted as a drag on commodities – copper, the industrial metal which as of recently was hitting headlines on strong performance, today touched its lowest in a month. China is the world’s second largest economy and any slowdown has the potential to negatively affect global markets.

The picture in Europe was mostly negative during morning trading hours. The FTSE 100 was only margin higher, the DAX declined by 0.3% and the CAC 40 by 0.1%. The broader gauge of European equities, the Stoxx 600, was trading 0.1% lower. The blue-chip Stoxx 50 was down by 0.2%.

Miners were once again in the red, being weighed by the China story. Basic materials was the worst performing Stoxx 600 sector, being last down by more than 0.5%. Mining firms and FTSE constituents Rio Tinto (down 1.8%), Glencore (down 1.7%), BHP Billiton (down 1.5%) and Anglo American (down 1.3%) all made the top-10 list of the UK blue-chip index’s biggest losers.

Next and Provident Financial were the Stoxx 600’s (as well as the FTSE’s) best and worst performing stocks respectively. The former today reported a fall in pretax profit for the first half of its fiscal year but raised its full year revenue and profit guidance. Additionally, the company signaled the return of its share buyback program with analysts at Investec and Morgan Stanley commenting that this is a positive sign. The clothing retailer’s stock price last traded up by an impressive 12.1%. Turning to Provident Financial, the consumer lender was on a negative footing after RBC cut its rating to “underperform” and reduced the company’s price target. It was last down by 4.6%.

Other notable movers were retailer Marks & Spencer (up 4.8%) and Morrison Supermarkets (down 3.9%). M&S today confirmed the starting date (October 2) of Jill McDonald, Managing Director of Clothing, Home & Beauty. Morrison, the supermarket chain fell despite reporting a double digit increase in first-half earnings and a seventh consecutive quarter of sales growth.

Dow Jones futures were last marginally down on the day, S&P 500 and Nasdaq 100 equivalents were down by less than 0.1%.

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