Market report

Markets plunge on Beijing Covid fear | Frasers buyback begins


5pm: London takes triple-digit hit

The FTSE 100 index closed 141.14 points lower at 7380.54, off its lows, but suffering another battering following Friday’s heavy losses.

Commodity stocks took the brunt of the sell-off amid China’s growing Covid concerns that could see more lockdowns and slower growth.

Fears about of a Covid lockdown in Beijing, in addition to similar action in Shanghai, and a possible EU ban on Russian oil, triggered a sell-off in resources stocks.

The CAC 40 index in Paris ended down 2%, while the DAX 40 in Frankfurt was 1.5% lower at the close.

CMC Markets analyst Michael Hewson said there are  concerns that China’s zero Covid policy will hobble the ability of the Chinese government in meeting its GDP target for this year. “The 5.5% target had already started to look difficult to achieve after first quarter GDP came in at 4.8%,” he said.

Defensive stock were the top risers, with Reckitt Benckiser the best performer, up 2.9% while Unilever added 1.9%. Anglo American top the losers, down 6.9%.

Brent oil was quoted at $100.33 a barrel at the equities close, down sharply from $106.44 at the close Friday.

US stocks were also weak in the New York morning session weighed down by worries over the pace of Federal Reserve interest rate hikes and ahead of some key corporate tech earnings this week.

Twitter was up 3.8% amid reports the social media company will soon accept Elon Musk’s takeover offer, but all three main indices were lower. The DJIA was down 1.2%, the S&P 500 index down 1.3% and the Nasdaq Composite down 0.3%.

AJ Bell investment director Russ Mould, said: “The prospect of further restrictions in China could lead to a poisonous mix of further inflationary pressure, as supply chains in the so-called ‘factory of the world’ get disrupted, and weaker economic growth.

“The result could be stagflation – a slowing economy accompanied by surging prices – a brew few investors would be able to stomach.”

Elsewhere, shares in McColl’s Retail Group more than halved in value after the indebted convenience store chain warned that its equity may be worthless (see below). Shares were 55% lower at 1.775p.

7am: Frasers buyback

Frasers Group announced today that it would launch a new share buyback programme between now and the start of its closed period for the financial year just ended.

The FTSE 250 retailer, which includes Sports Direct and Evans Cycles, said the total purchase price of all shares acquired under the programme would be no higher than £70m.

“The purpose of the programme is to reduce the share capital of the company,” Frasers said.

Frasers Group were down 0.8% at 684.5p

7am: McColl’s delays results


McColl’s Retail Group warned that its equity may have no value and is delaying its full year results until it reaches agreement on refinancing.

It said a potential financing solution is under active discussion with its key commercial partner and lenders which would resolve the short term funding issues and create a stable platform for the business. 

Full story here

7am: Space and People

Space and People, the Glasgow-based shopping centre promotions company, returned to profit and said it looks forward to a “normal” year of trading.

Chairman George Watt said: “The difficult decisions that were made during this period have left a more resilient business which has a robust balance sheet and stable, committed finance facilities.

“The biggest impacts were felt in 2020’s results through non-recurring charges in the income statement with no similar charges in the year we are now reporting on.

“Growth returned to the business in 2021, as we expected, but remained below pre-pandemic levels despite new venue wins and we look forward to a more normal year of trading in 2022. However, a significant milestone was achieved last year with the move back into profit and positive earnings per share.”

The company said pre-tax profit came in at £75,000 for the year to the end of December following a loss of £3.6 million in 2020. Revenue was £4m (2020: £2.8m and 2019: £7.7m).

Global markets

Oil prices slumped to near two-week lows today, extending losses from last week, as concerns grew that prolonged COVID-19 lockdowns in Shanghai and potential U.S. rate hikes would hurt global economic growth and fuel demand.

Brent crude futures were down $3.15, or 3.0%, at $103.50 a barrel by 0326 GMT. They touched $103.41 earlier in the session, the lowest since 12 April.

US West Texas Intermediate (WTI) crude futures fell $3.01, or 3.0%, to $99.06 a barrel, having skidded earlier to $98.93, the lowest since April 12 – Reuters.

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