FTSE 100 miners weigh after Chinese economic growth hits lowest level since the 90s

  • FTSE 100 eases 28 points

  • Chinas gross domestic product was up 6.0% year-on-year in the third quarter

  • Hotels sector in focus after trading updates from IHG and EasyHotel and a knock-out bid for Elegant

Miners were acting as a drag on the Footsie on Friday, in a predictable reaction to some insipid gross domestic product (GDP) data from China.

The FTSE 100 was down 28 points (0.4%) at 7,154.

The GDP number for September (see below) came in a one-tenth of a percentage point below the consensus forecast, although Pantheon Macroeconomics reckons the “consensus looked very optimistic in the context of the nasty activity data last quarter, and very tight monetary conditions.”

“Any miss, even only by 0.1pp [percentage point], is significant in China, where the headline hasnt moved by more than 0.2pp from quarter to quarter in years. Similarly, the smattering of 5.9% estimates looked premature as a 0.3pp drop would have been too strong a signal that the economy is on the rocks. Instead, 5.9% will come this quarter.

“We calculate our own version of real GDP, starting from the nominal GDP and using price data to compile a deflator. This suggests the situation, in reality, is much worse than the headlines suggest. We still await some data before finalising our estimate, but for now, we think growth slowed to just 4.5% in Q3, from 5.1% in Q2. Nominal GDP growth slowed to 7.6%, from 8.3% in Q2. The rise in our deflator also weakened but by only 0.2pp, to 3.0%,” the forecasting unit added.

ING Economics, meanwhile, said that despite the uncertainty over the trade war with the US, it was raising its fourth-quarter forecast of growth for the Chinese economy.

#macrobond #china #gdp #history #macroeconomy #economy #chinageddon

YoY GDP growth in China in Q3 lowest since 1990 (+6%)

— Wojciech Białek (@wb_kNOw_FUTURE) October 18, 2019

“We expect infrastructure projects to continue to be the central pillar of growth in the fourth quarter,” ING said.

“There is another CNY1 trillion yuan from the local government special bond quota, borrowed from next year, to be used until the end of 2019. These bonds are the source of financing for infrastructure projects. As such, both investment and industrial production will continue to rely on infrastructure.

“This will mark even bigger differences between private and public sector growth. The private sector will continue to suffer from the scaling down of factory activity due to the US tariffs. This will add even more uncertainty in terms of job security and salary growth which, in turn, will put pressure on consumption, even if substantial public sector growth acts to counter these negative pressures.

“The good news is that we expect 5G infrastructure, production and services to start to make a visible contribution to the economy from the fourth quarter. Although it is still uncertain how much 5G can help China's exports, domestic usage of 5G alone should offer good support to the economy,” ING added.

All of the above may not have much to do with the price of fish but it is having an effect on the share prices of miners and fellow travellers, with the likes of Evraz plc (LON:EVR), Antofagasta PLC (LON:ANTO), Fresnillo Plc (LON:FRES), BHP Group PLC (LON:BHP) and Anglo American plc (LON:AAL) down by more than 1%.

Its been an interesting morning for hotels stocks with InterContinental Hotels Group PLC (LON:IHG) off 2.5% at 4,620p after a disappointing third-quarter trading statement and Elegant Hotels Group PLC (LON:EHG) soaring 56% to 109.5p after a knockout 110p a share cash offer from Marriott International.

EasyHotel PLC (LON:EZH) advanced 3.0% to 102p after it said it had outperformed the UK market over the past 12 months.

8.50am: People's Republic's economy showing the effects of the US trade war

The miners led the retreat on the FTSE 100 after the Chinese economy grew at its slowest pace in more than 30 years.

The Peoples Republic is a big importer of the bulk commodities consumed by builders.

So it was no surprise Evraz (LON:EVR), which mines and sells and iron ore, and Antofagasta (LON:ANTO), one of the worlds biggest copper diggers were down respectively 2.3% and 1.3%.

Also in the doldrums was Intercontinental Hotel Group (LON:IHG) with its share receding 2.4% after its quarterly revenues missed their target.

On the up early on was the London Stock Exchange (LON:LSE), whose trading in the third quarter exceeded expectations. Its shares opened 1.4% higher.

The builders, which wax and wane as the prospect of a Brexit deal rises and recedes, were in demand early on amid guarded (and possibly misguided) optimism Boris Johnson can get parliamentary backing for his blue-print.

Berkeley (LON:BKG) and Barratt Developments (LON:BDEV) were up 1.5% and 1% respectively.

Proactive news headlines

APQ Global PLC (LON:APQ) ended the third quarter with “fairly defensive positioning” but is on track to meet its target annual dividend yield of 6%.

Amphion Innovations PLC (LON:AMP) has received confirmation that the sale of its stake in medical imaging group Polarean settled its loan facility with no outstanding obligations to the lender. The sale raised US$2.6mln. Shares in Amphion remain suspended with the group still describing itself as highly cash constrained.

Live Company Group PLC (LON:LVCG) is still in advanced discussions with the sellers of Bright Bricks Holdings about the deferred consideration for the acquisition.

Curzon Energy PLC (LON:CZN) told investors it has agreed to refinance £200,000 of secured loan notes.

Thor Mining PLC (LON:THR) has confirmed plans for an equity fundraise and will announce the details in due course.

6.45am: FTSE 100 to get off to slow start

Slowing Chinese economic growth and a dose of realpolitik in the UK have conspired to dampen sentiment in the London equity market.

Spread betting quotes suggest the FTSE 100 will open 9 points lower at around 7,173, after rising 14 points to close at 7,182 yesterday.

Chinas gross domestic product was up 6.0% year-on-year in the third quarter, which was its slowest growth rate in almost 30 years. Economists had expected the growth rate to slow from the second quarter rate of 6.2% to 6.1%.

Industrial output was 5.8% higher than the year before in September, ahead of forecasts of a 5.0% increase, after rising 4.4% in August.

Retail sales were in line with forecasts, up 7.8% year-on-year, up from Augusts 7.5% increase.

“Weak growth data confirmed that the trade disruptions with the US have continued taking a toll on Chinas economy during the third quarter and a trade truce is the only way to put the EM [emerging market] giant back on its feet. In this respect, and despite the rising tensions with the US, Chinese leaders are working hard to find an agreement with their US counterparts,” said Ipek Ozkardeskaya at London Capital Group.

“With economic growth poised on the brink of the critical 6% level, Xi needs a deal more than ever,” the analyst added.

Stocks in Hong Kong were predictably softer following the Chinese data, with the Hang Seng down 30 points at 26,818.

Elsewhere in Asia, Japans Nikkei 225 was 72 points firmer at 22,524, picking up the baton from US stocks, which were mostly firmer yesterday.

The Dow Jones industrial average advanced 24 points to 27,026 and the S&P 500 improved 8 points to 2,998.

In the UK, the abacus rattlers will be making a racket trying to work out whether the government has enough votes to get the latest Brexit deal through the House of Commons.

“After DUP rejected the deal yesterday, we think it is very difficult for Johnson to get it through Parliament and our base case remains another extension followed by a snap election. However, it may be closer than ever as the FT counted that Johnson is two votes short of getting the deal through the House of Commons, while Sky counted four votes short,” reported Danske Bank.

The political wrangling is likely to overshadow what is a halfway decent schedule of company news flow for a Friday that includes trading statements from anti-virus software maker Avast PLC (LON:AVST), which has been in the spotlight since the agreed bid for competitor Sophos Group, and London Stock Exchange Group PLC (LON:LSE), fresh from beating off an unwelcome bid approach from Hong Kong.

InterContinental Hotels Group PLC (LON:IHG) will deliver a third-quarter update with shareholders hoping for something that will help the shares recover their mojo.

Over the decade to the end of this July, shares in the Holiday Inn owner's shares soared sixfold to an all-time high of above £57, but have fallen 17% in the two and a half months since.

In August's half-year results, the FTSE 100 company showed evidence of weaker revenue available per room (revpar) in the key market of the US and China.

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