London midday: Stocks decline on China slowdown fears

London stocks declined on Monday, following a slump in Asian equities as concerns over China’s economic slowdown persisted.

China’s inflation rose to 1.6% year-on-year, as expected, compared with 1.5% the previous month. However, the producer price was unchanged at minus 5.9% in December, according to the National Bureau of Statistics.

The People’s Bank of China on Monday set the yuan's reference rate against the dollar at 6.5626, up on Friday's fixing of 6.5636, but it did little to cheer the market.

“While China’s yuan currency was fixed slightly firmer, note Saturday’s Chinese inflation data which saw consumer price inflation edge up as expected to 1.6% but producer prices remain under pressure and fail to deliver the uptick expected by consensus,” according to Mike van Dulken and Augustin Eden at Accendo Markets.

“This data will only add to hopes of more intervention by the People’s Bank of China to both buoy the equity markets as well as the flagging growth that is concerning investors worldwide."

Meanwhile oil prices remained under the cosh amid worries about an oversupply in the market and tensions in the Middle East. At 1137 GMT, Brent crude fell 2.3% to $32.79 per barrel and West Texas Intermediate declined 1.8% to $32.55 per barrel.

Morgan Stanley warned that if rapid devaluation occurs, a15% depreciation in the Chinese yuan alone could send oil into the $20s.

“Oil is particularly levered to the US dollar with betas ranging from 2-5. If the USD appreciated 5%, oil could fall 10-25%,” the broker added.

In economic data, economic sentiment in the Eurozone worsened more than expected in January, according to Sentix. The index gauging economic confidence among investors slid to 9.6 from 15.7 in December, missing expectations for a reading of 12.2.

“Fears over China’s devaluation—as an omen of a hard landing in the economy—and increased global deflation risks likely will linger in the short run,” said Pantheon Macroeconomics. “But we think both equities and sentiment will recover in coming months, as the continuation of QE and a stable cyclical recovery remains important tailwinds.”

Still to come, the US labour market conditions index will be released at 1500 GMT while Federal Reserve policymaker Robert Kaplan speaks after the close.

On the company front, BAE Systems gained after JP Morgan Cazenove said it believed 2016 will be a big year for defence stocks and upgraded the stock from ‘neutral’ to ‘overweight’.

Cobham also advanced as JP Morgan raised its price target from 300p to 335p.

Savills jumped after the real estate firm said underlying full year results will be ahead of previous expectations boosted by its investment management business although it warned that global economic uncertainty and rising interest rates would result in a “tempering” of transaction volumes.

Sports Direct continued to fall after warning on Friday that annual profits would be £40m lower than expected following poor Christmas sales.

Market Movers

FTSE 100 (UKX) 5,911.88 -0.01%
FTSE 250 (MCX) 16,676.02 -0.34%
techMARK (TASX) 3,165.75 0.10%

FTSE 100 - Risers

Anglo American (AAL) 237.80p 3.75%
Sage Group (SGE) 589.50p 2.08%
BAE Systems (BA.) 529.00p 1.83%
Glencore (GLEN) 78.64p 1.50%
Standard Chartered (STAN) 512.50p 1.38%
Whitbread (WTB) 4,177.00p 1.38%
Intertek Group (ITRK) 2,693.00p 1.32%
Shire Plc (SHP) 4,333.00p 1.31%
British Land Company (BLND) 751.00p 1.28%
Land Securities Group (LAND) 1,132.00p 1.25%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 1,349.00p -2.03%
Sports Direct International (SPD) 425.00p -1.92%
St James's Place (STJ) 905.50p -1.74%
Inmarsat (ISAT) 1,091.00p -1.36%
Marks & Spencer Group (MKS) 425.00p -1.32%
Smith & Nephew (SN.) 1,140.00p -1.30%
Hikma Pharmaceuticals (HIK) 2,170.00p -1.23%
Persimmon (PSN) 1,969.00p -1.15%
BG Group (BG.) 929.20p -1.15%
Barratt Developments (BDEV) 590.50p -1.09%

FTSE 250 - Risers

Laird (LRD) 360.70p 9.64%
Home Retail Group (HOME) 148.10p 7.40%
Jimmy Choo (CHOO) 124.00p 5.89%
Ophir Energy (OPHR) 88.65p 5.47%
Savills (SVS) 882.00p 4.38%
Evraz (EVR) 64.65p 2.62%
Countrywide (CWD) 389.20p 2.47%
Vesuvius (VSVS) 312.80p 1.79%
Nostrum Oil & Gas (NOG) 364.90p 1.36%
Smith (DS) (SMDS) 381.50p 1.35%

FTSE 250 - Fallers

Allied Minds (ALM) 370.10p -4.44%
Ocado Group (OCDO) 282.80p -4.14%
JD Sports Fashion (JD.) 994.00p -3.78%
QinetiQ Group (QQ.) 251.90p -3.38%
Booker Group (BOK) 171.80p -2.94%
Amec Foster Wheeler (AMFW) 371.60p -2.90%
Hays (HAS) 132.80p -2.71%
Fidelity China Special Situations (FCSS) 126.50p -2.69%
Serco Group (SRP) 85.00p -2.69%
Sophos Group (SOPH) 246.70p -2.64%