London midday: Stocks regain strength as China woes ease
The UK equities market was looking brighter on Thursday as worries on the China slowdown eased after the central bank injected fresh stimulus.
The People’s Bank of China on Wednesday announced it would pump 140bn yuan of stimulus into the economy a day after cutting interest rates, the deposit facility and the reserve rate ratio.
The measures initially failed to lift Chinese stocks, but Thursday’s session ended higher to provide the UK a boost following the previous day’s lows. After Asian markets closed, reports emerged that China's government intervened to bolster equities through the acquisition of blue-chip stocks. Bloomberg cited sources saying that authorities wanted the market to stabilise ahead of a military parade on 3 September celebrating the World War II victory over Japan.
Global stocks plunged on ‘Black Monday’ as investors began to panic about China’s flagging economy. The concerns on the health of the world’s second-largest economy have been growing since the PBoC devalued the yuan on 11 August.
In light of the market volatility, Federal Reserve official William Dudley said the case for an interest rate hike in September seemed “less compelling”.
The Fed will be assessing US gross domestic product data, due at 1330 BST, as it determines the best timing for the first interest rate increase in nine years.
Economists have forecast a pick-up in growth by an annualised 3.2% in the second quarter, accelerating from the previous quarter’s 2.3% gain.
The US will also see the release of weekly jobless claims figures and pending home sales at 1330 BST and 1500 BST respectively.
On the company front, CRH surged after the building materials group posted a 3% rise in first half pre-tax profit to €61m and said it would buy US firm C.R Laurence Co for $1.3bn.
Lonmin gained after the platinum miner said it has cut 1,400 jobs so far out of an estimated target of 6,000 in an effort to address lower commodity prices.
Other miners including Anglo American and BHP Billiton advanced on the pick-up in China stocks and an increase in gold, silver and copper prices.
Petrofac jumped after Societe Generale upgraded its stance on the stock to ‘buy’ from ‘hold’.
Heading the other way, Playtech’s shares went south despite reporting a 19% rise in adjusted first-half net profit as revenues increased amid growth across its businesses .
John Laing Group declined after reporting a 68% drop in pre-tax profits in the first half, as earnings were hit by forex headwinds.
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