London midday: Stocks mixed after China makes bigger rate cut

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BHP Group Limited NPV (DI)

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17:15 20/12/24

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-2.00p

London's stocks were in a mixed state at midday on Tuesday, as concerns around China's economic outlook continued to weigh on mining stocks.

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Barclays was surging, however, following a positive investor response to the bank's strategic restructuring.

At midday, the FTSE 100 was up 0.17% at 7,742.01 points, while the FTSE 250 index dipped slightly by 0.23% to 19,172.92 points.

In currency markets, sterling was last down 0.02% on the dollar to trade at $1.2592, while it was off 0.23% against the euro, changing hands at €1.1659.

“Stocks advanced a bit on Monday in London but retreated a bit on Tuesday as metal prices declined following the reopening of markets in China,” said Neil Wilson, chief market analyst at Markets.com.

“Iron ore futures skidded lower amid demand worries as China delivered the largest ever cut to its benchmark mortgage rate.

“The PBoC’s 25-basis point cut to the five-year loan prime rate was the biggest since the benchmark was introduced in 2019 and it shows Beijing is concerned.”

Wilson noted that equities in mainland China and Hong Kong fell first, before rallying towards the end of the Asian session.

“European stock markets were mainly a tad lower in early trade on Tuesday but lacking meaningful direction, though both Paris and Frankfurt are trading close to all-time highs struck earlier in the month.

“The FTSE 100 is holding onto the 7,700 handle; the US reopens after a holiday, with the S&P 500 a little below the 5,000 mark.”

China central bank cuts interest rate more than expected

In economic news, the People's Bank of China (PBoC) moved to support the nation's property market overnight, cutting its benchmark five-year loan prime rate for the first time since June.

While the one-year loan prime rate remained steady at 3.45%, the PBoC announced a 25-basis point reduction in the benchmark five-year loan rate to 3.95%.

The reduction in the five-year rate for February exceeded market expectations, with analysts polled by Reuters anticipating a more conservative decrease of between five and 15 basis points.

It followed Beijing's recent reduction of reserve ratio requirements for banks by 50-basis points from 5 February, which injected CNY 1trn (£110bn) of long-term capital into the financial system.

“In our view, the combination of a cut to the five-year LPR today, a 25-basis point RRR cut in January, and non-moves to the one-year medium-term lending facility and LPR in recent months signals authorities' continued preference for targeted easing, and their desire to ramp up support for the property sector,” said Oxford Economics lead economist Louise Loo.

“Today's move is also consistent with how we think authorities are diagnosing China's property problem, which will drive a managed 'staircase-shaped' correction path.

“[It is] Not just about housing delivery - a late-2022 to late-2023 policy focus - but also about cleaning up the excess inventory sitting on private developer balance sheets - and possibly transferring onto the government balance sheet - through a mix of monetary and fiscal easing.”

On home shores, the Competition and Markets Authority (CMA) initiated a market study into the supply of infant formula, after an initial examination of the market in November.

The competition regulator announced its intention to conduct the market study “as swiftly as possible”, with plans to publish the final report in September.

It said it aimed to gather additional evidence on consumer behaviour, drivers of choice, available information and advice for consumers, as well as the regulatory framework's role and its enforcement in influencing market outcomes and supply-side features.

BHP leads miners lower, Barclays in the green

On London’s equity markets, Australian mining giant BHP faced pressure as its annual profits declined due to challenges in its nickel operations and lingering financial impacts from the 2015 Samarco dam disaster in Brazil.

Additionally, weakness in metals prices weighed down miners more broadly, with Anglo American, Rio Tinto, and Glencore all registering decreases.

National Express owner Mobico also found itself in the red after announcing a delay in its results due to an accounting review of its German rail business and an anticipated increase in an onerous contract provision.

On the upside, Barclays jumped despite reporting a fall in annual earnings, as its strategic plans to return at least £10bn of capital to shareholders between 2024 and 2026 were positively received.

The bank also announced a £2bn -cutting initiative.

InterContinental Hotels Group experienced a slight increase following its full-year results, while Plus500 rallied after announcing plans for $175m in shareholder returns.

Domino’s Pizza Group gained traction after receiving an upgrade to 'buy' from 'hold' at Jefferies, accompanied by an increased price target.

Superdry saw a sharp rise following reports of interest from prominent US investor Davidson Kempner in a potential offer to take the struggling fashion chain private.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,742.05 0.18%
FTSE 250 (MCX) 19,173.46 -0.23%
techMARK (TASX) 4,388.93 -0.24%

FTSE 100 - Risers

Barclays (BARC) 157.76p 5.88%
InterContinental Hotels Group (IHG) 8,220.00p 3.92%
Antofagasta (ANTO) 1,825.50p 3.43%
Aviva (AV.) 441.20p 2.53%
Centrica (CNA) 133.65p 2.18%
Marks & Spencer Group (MKS) 243.60p 2.14%
Croda International (CRDA) 5,056.00p 1.42%
SSE (SSE) 1,618.00p 1.25%
Entain (ENT) 933.00p 1.19%
National Grid (NG.) 1,033.50p 1.17%