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London open: Stocks edge up as investors mull China data; US earnings season eyed
London stocks nudged up in early trade on Monday as investors mulled mixed Chinese economic data and looked ahead to the start of the US earnings season.
At 0825 BST, the FTSE 100 was up 0.1% at 7,516.34, while the pound was flat against the dollar at 1.2568 and down 0.1% versus the euro at 1.1146.
Data released earlier by China’s statistics bureau showed that economic growth there eased to its weakest pace in 27 years in the second quarter. In the three months to June, gross domestic product rose 6.2%, down from 6.4% growth in the first three months of the year but in line with economists’ forecasts as the trade war with the US rumbles on.
Other data showed that industrial production rose 6.3% in June compared to a year earlier, up from 5% growth the month before, while retail sales were up 9.8% year-on-year compared to 8.6% growth in May – both ahead of expectations. Economists had been expecting growth of 5.2% and 8.3%, respectively.
Fixed asset investment for June came in at 5.8% growth versus 5.6% the previous month and ahead of economists’ expectations of 5.5% growth.
Oanda analyst Craig Erlam said: “There’s no doubt in anyone’s minds that the trade war is a major contributing factor here, especially coming at a time when the economy was already in the midst of a slowdown as it transitions away from the heavy investment, export led model to a more sustainable domestically driven one.
“While industrial production, fixed asset investment and, maybe more importantly, retail sales all exceeded expectations, all the focus has been on that lower growth number.”
Geopolitical tensions were in focus after France, Germany and the UK called on Iran to “act responsibly” and fully comply with commitments made in a 2015 international nuclear agreement.
Market participants were also eyeing the start of the US earnings season, with Citigroup slated to report later in the day and more earnings due from the likes of JPMorgan, Goldman Sachs and Bank of America Merrill Lynch this week.
In UK equity markets, Antofagasta pushed higher after a World Bank arbitration court ordered the Pakistani government pay damages of $5.8bn to Tethyan Copper, which is a joint venture between Antofagasta and Canada’s Barrick Gold.
Just Eat rallied as the Daily Mail suggested it could be a target for Amazon, while Travis Perkins gained following a report in The Times that the company is accelerating plans to sell its Wickes division for between £400m and £500m.
On the downside, Sports Direct shares slumped after the retailer said it was delaying the publication of its preliminary results as it pointed to the “complexities” of integrating House of Fraser and warned that the guidance given back in December could be “materially” affected. The company also cited “increased regulatory scrutiny” of auditors and audits including the FRC review of Grant Thornton’s audit of its financial statements for the period to 29 April 2018.
Neil Wilson, chief market analyst at Markets.com, said: “Looking to the earnings, top line growth is expected to rise but profits are seen weaker as the cost of acquisitions weighs. Since reporting an 27% decline in underlying profits in the first half we’ve not heard a peep from Sports Direct on performance.
“The delay in delivering the annual results does not sit well with investors, who must be nervous about what it means. It seems likely it’s been a tough ride in the core Sports Direct retail division, whilst acquisitions have added nothing but increased costs.”
In broker note action, Cairn Energy was hit by a downgrade to ‘underperform’ at Jefferies.
