(Alliance News) - Stocks in London were mixed at midday on Tuesday after the long bank holiday weekend with sentiment dented by renewed Chinese economic concerns.
China's services sector contracted in August for the first time since the start of the pandemic while factory activity slowed further, data showed, as domestic coronavirus travel curbs hit demand for transport and tourism.
The non-manufacturing purchasing managers' index, a key gauge of activity in China's services and construction sectors, fell to 47.5 in August from July's 53.3, the National Bureau of Statistics said.
The measure for factory activity, manufacturing PMI, came in at 50.1 in August from July's 50.4. Anything above 50 indicates expansion, while below that figure points to contraction.
The FTSE 100 index was down 19.43 points, or 0.3%, at 7,128.58. The mid-cap FTSE 250 index was up 70.14 points, or 0.3%, at 24,130.19. The AIM All-Share index was up 0.6% at 1,288.69.
The Cboe UK 100 index was down 0.3% at 709.41. The Cboe 250 was up 0.2% at 21,917.52, and the Cboe Small Companies was up 0.1% at 15,538.41.
In mainland Europe, the CAC 40 stock index in Paris was up 0.1%, while the DAX 30 in Frankfurt was up 0.5%.
"After US Federal Reserve Chair Jerome Powell eased the market's concern about a tapering of support for the economy at Jackson Hole on Friday, investors have now gone back to fretting about the Covid recovery," said AJ Bell investment director Russ Mould.
"The FTSE 100 started a smidge lower after the Bank Holiday. Numbers out of China showed the first contraction in its services sector in 18 months and bore an uncomfortable echo of the beginnings of the pandemic," Mould added.
In the FTSE 100, Weir Group was up 2.0% after Peel Hunt upgraded the engineer to Buy from Hold.
InterContinental Hotels Group was up 0.7% after Societe Generale raised the Holiday Inn and Crowne Plaza owner to Buy from Hold.
At the other end of the large-caps, British Airways parent International Consolidated Airlines Group was the worst performer, down 3.1%, on wider concerns around the travel sector. Jet engine maker Rolls-Royce was also down 2.4%.
The EU on Monday recommended that its member states reimpose travel restrictions on US tourists over rising Covid-19 infections in the country.
The European Council, which represents the bloc's 27 governments, said it was taking six territories off its list of locations exempted from restrictions on non-essential travel during the coronavirus pandemic. The move is not binding on national capitals, which may yet choose to allow fully vaccinated US travellers to visit despite concerns about rising numbers of Covid cases in the country.
Midcap airlines easyJet and Wizz Air were down 1.7% and 2.8% respectively. Irish carrier Ryanair Holdings was 2.3% lower.
Bunzl was down 2.1% after the distribution firm pointed to a "reversal" in Covid-19 related sales, despite a rise in interim earnings.
For the six months that ended June 30, revenue was GBP4.87 billion, up 0.4% from GBP4.85 billion last year and pretax profit was GBP275.7 million, up 12% from GBP245.4 million.
Chief Executive Officer Frank van Zanten said: "Whilst we are now seeing a reversal in Covid-19 related sales, this has been more than offset by the recovery experienced in our base business over the first half. The group's performance over the first half and the excellent underlying revenue growth we have delivered over a two year period demonstrate the resilience of our diversified portfolio."
In addition, Bunzl flagged up supply chain issues within its results. It noted supply chain challenges in areas such as North America, Mexico and Australia.
Computacenter was the best performer in the FTSE 250, up 3.7%, after the IT services provider said trading has continued to be robust across all of of its geographies in July and August to date.
The company said the "exceptionally good performance" in the second half of 2020 makes a more difficult comparison than it experienced in the first half of this year. However, even with a flat performance in the second half of 2021 compared to the second half of last year, the company said it would finish the year 10% ahead of current market expectations for the group's full year 2021 adjusted pretax profit. It posted adjusted pretax profit of GBP200.5 million in 2020.
The pound was quoted at USD1.3776 at midday Tuesday, up from USD1.3752 at the London equities close Friday.
The euro stood at USD1.1830 at midday, up from USD1.1788 late Friday after data showed inflation on the continent accelerated to its highest level in a decade.
Eurozone annual inflation surged to 3.0% in August, according to official data, as widespread shortages, rising energy costs and one-off effects sent consumer prices in Europe sharply higher. In July, consumer prices had risen 2.2% year-on-year.
August's inflation rate was a full percentage point higher than the European Central Bank's target of 2% and was at a level last reached in November 2011, though economists insist the hike is linked to effects of the coronavirus pandemic and will be short-lived.
Despite the jump in inflation, analysts at ING do not think this is likely to sway the ECB towards a more hawkish stance ahead of the September monetary policy meeting next week.
"ECB President Christine Lagarde repeatedly mentioned that the ECB would not act on temporary inflation. Today's release will cause some sweaty palms but has not given much evidence of more structural high inflation. The macro projections presented at next week's meeting will likely not have seen too much extra upward pressure yet," analysts at the bank said.
Against the Japanese yen, the dollar was trading at JPY109.85, down from JPY109.92.
Brent oil was quoted at USD72.87 a barrel at midday, up from USD72.28 at the London equities close Friday, ahead of the virtual OPEC meeting on Wednesday.
Gold was trading at USD1,816.35 an ounce, higher against USD1,807.81 late Friday.
US stock market futures were set for a higher open, with the S&P 500 index looking to extend further records.
The Dow Jones Industrial Average was called up 0.2%, the S&P 500 up 0.1%, and the Nasdaq Composite up 0.1%.
On the corporate front, Zoom Video Comminations shares will be in focus after the video conference software provider reported earnings late Monday.
Revenue for the three months to the end of July was USD1.02 billion, up 54% from USD663.5 million a year before. Growth was boosted by the rising number of customers contributing more than USD100,000 in the previous 12 months, which more than doubled year-over-year.
Zoom posted GAAP net income for the second quarter of USD316.9 million, up 71% from UDS185.7 million a year before. Non-GAAP net income rose 51% from a year earlier to USD415.1 million.
However, the stock fell 11% in pre-market trade in New York amid fears growth would begin to normalise as the pandemic subsides and as workers return to offices.
On the political front, US President Joe Biden announced he will address the nation Tuesday on the final US exit from Afghanistan after 20 years of war against the Taliban.
"Tomorrow afternoon, I will address the American people on my decision not to extend our presence in Afghanistan beyond August 31," he said in a statement shortly after the Pentagon announced that the final US military plane had flown out of Kabul.
Biden's statement praised the military for carrying out the evacuation of final US troops, diplomats, and nearly all Americans, as well as tens of thousands of Afghan allies who worked for or fought alongside international forces in the war.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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