London open: Rare Chinese trade deficit leaves traders scratching heads

Investors continued to play it safe ahead of the UK Budget later in the day, not to mention a key policy meeting at the European Central Bank the next day and monthly US jobs data out on Friday.

Complicating matters further, data released overnight revealed a trade deficit in China during the month of February, a rare occurrence, but perhaps a timely one, showing how the world economy was in a state of flux.

As of 0823 GMT the Footsie was down by 0.06% or 4.36 points to 7,334.74.

"Calls for a negative open come after yet another down day on Wall St that was emulated in Asia overnight," said Michael Van Dulken, head of research at Accendo Markets.

"Dragging on sentiment is China trade data showing a plunge to its first deficit since early 2014 with markets cautious about how to interpret the key data points ahead of a potential Fed rate hike."

The Chancellor will present his Budget at 1230 GMT against that daunting backdrop. Although he is expected to reveal an improvement in public finance figures from the Office for Budget Responsibility, Philip Hammond is expected to try and balance the calls for further investment in health and social care, supporting working families with continued belt tightening.

This budget is even more of a balancing act than usual, said Rebecca O'Keeffe, head of investment at Interactive Investor.

"Hammond needs to present Britain as being robust and ready for Brexit, while also building a war chest just in case. Previous budgets have often benefited individual sectors, such as house-builders, but although higher growth forecasts and higher tax receipts potentially give the Chancellor more room to manoeuvre, the Chancellor is likely to remain defensive on spending and the scope for pleasant surprises is limited."

China fell into a $8.79bn trade deficit in February, its first since 2014, as the country's imports surged.

According to the State Customs Administration, China's imports soared, expanding at an annualised clip of 44.7% (consensus: 20.0%), which was up from a 25.2% rise in January. Meanwhile, exports grew at a 4.2% year-on-year clip in February (consensus: 13%), after a rise of 15.9% in the month before.

Nonetheless, if both January and February data are combined in order to eliminate distortions from the Chinese Lunar New Year, then exports were ahead by 11% and imports by 34.1%, Julian Evans-Pritchard at Capital Economics said.

"Looking ahead, we expect external demand to remain fairly strong during the coming quarters which should continue to support exports. However, we doubt that the current pace of import growth can be sustained. For a start, the favourable base effects that have boosted commodity price inflation, and therefore import values, will reverse before long. And more fundamentally, with growth in China currently running above trend and both monetary and fiscal policy being tightened, it is only a matter of time before we see a slowdown in domestic demand," Evans Pritchard said.

The monthly US ADP payrolls report for February is scheduled for release at 1315 GMT.

As far as early actions from the main brokers were concerned, HSBC upped its target on GKN from 395p to 445p while reiterating a 'Buy'. The same broker also expressed favourable opinions towards AB Foods and B+M.

CMC makes a move Down Under

Online retail trading provider CMC Markets announced a major new stockbroking partnership with Australia and New Zealand Banking Group on Wednesday, which would result in CMC becoming the second largest stockbroker in Australia by both number of clients and trades executed.Following a transition period, CMC will service more than 500,000 ANZ retail stockbroking clients under the ANZ Share Investing brand, with gross revenue projected to increase by approximately AUD 40m.

Insurer Legal & General said full year pre-tax profits rose 17% to £1.6bn as the net cash increased 12% to £1.4bn.Adjusted operating profits rose to £1.6bn from £1.4bn. Earnings per share were up 19% at 22.2p. The full year dividend was up 7% 14.35p a share."With further political and economic uncertainty anticipated in 2017 and beyond, we expect further market volatility. The risk of slowing global economic activity remains and no business model can be fully immunised," L&G said. "However, we believe the opportunities available to the Group, primarily in the UK and US, remain attractive."

Admiral shares slipped as full year profits fell by a quarter due to the government's recent changes to the 'Ogden' rate at which personal injury claims are calculated, though the non-life insurer's hefty dividend was held steady as underlying profits edged higher. With customer numbers increasing 16% on the previous year to 5.15m, turnover for calendar-2016 grew 22% to £2.6bn and revenue by 13% to £1.02bn. Profit fell 25% to £284.3m due to the effect of Ogden, though if that was excluded it would have risen 3% to £389.7m.

Frankie & Benny’s and Chiquito owner Restaurant Group said 2016 was "challenging" following poor trading across its leisure brands with like-for-ike sales down. Revenue was up 3.7% to £710.7m but like-for-like sales were down 3.9% compared to to the previous year.

G4S was higher as it reported good progress with its transformation strategy, with revenue up 6.3% and earnings growth of 16.6%.

Shares in Dignity slumped as the funeral service provider revised its medium-term target underlying earnings per share growth rate to 8% per year from 10% due to increasing competition in each of its markets.

Market Movers

FTSE 100 (UKX) 7,333.14 -0.08%
FTSE 250 (MCX) 18,879.63 -0.03%
techMARK (TASX) 3,427.99 -0.04%

FTSE 100 - Risers

Glencore (GLEN) 324.80p 1.50%
Intertek Group (ITRK) 3,803.00p 1.01%
Paddy Power Betfair (PPB) 8,350.00p 0.97%
Rio Tinto (RIO) 3,318.50p 0.88%
Antofagasta (ANTO) 787.00p 0.77%
AstraZeneca (AZN) 4,747.00p 0.65%
Worldpay Group (WPG) 274.20p 0.62%
Anglo American (AAL) 1,233.50p 0.53%
WPP (WPP) 1,732.00p 0.52%
Convatec Group (CTEC) 258.90p 0.47%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 7,040.00p -1.74%
Capita (CPI) 510.00p -1.54%
Babcock International Group (BAB) 894.00p -1.27%
BT Group (BT.A) 328.50p -1.20%
Admiral Group (ADM) 1,778.00p -1.17%
easyJet (EZJ) 943.50p -1.10%
Dixons Carphone (DC.) 301.30p -1.05%
Royal Mail (RMG) 399.80p -0.92%
RSA Insurance Group (RSA) 587.50p -0.76%
Informa (INF) 657.50p -0.75%

FTSE 250 - Risers

G4S (GFS) 285.80p 6.88%
CMC Markets (CMCX) 127.30p 5.21%
Hill & Smith Holdings (HILS) 1,209.00p 5.13%
Inmarsat (ISAT) 719.50p 5.11%
Just Eat (JE.) 569.50p 5.07%
Restaurant Group (RTN) 342.90p 4.77%
CLS Holdings (CLI) 1,780.00p 4.71%
Aldermore Group (ALD) 242.60p 1.98%
AO World (AO.) 150.40p 1.55%
Ferrexpo (FXPO) 155.20p 1.44%

FTSE 250 - Fallers

Dignity (DTY) 2,455.00p -11.18%
Aggreko (AGK) 887.00p -3.69%
Go-Ahead Group (GOG) 1,738.00p -2.74%
Sports Direct International (SPD) 278.30p -2.45%
Berendsen (BRSN) 780.00p -2.13%
Cobham (COB) 124.60p -1.81%
Greene King (GNK) 667.50p -1.48%
Paysafe Group (PAYS) 404.40p -1.15%
TalkTalk Telecom Group (TALK) 168.70p -1.11%
Carillion (CLLN) 224.20p -1.06%