FTSE 100 makes positive start to proceedings with Rolls-Royce and BAE Systems boosted by Aukus agree

  • FTSE 100 up 32 points
  • Burberry falls again
  • Ashtead boosted by results

9.38am: Evergrande saga adds to China concerns while mining shares drop


Speaking of China, the recent economic data including retail sales suggests a slowdown in the world’s second biggest economy which is causing some worry for investors.


But there are also concerns about a potential collapse of the country’s second largest property developer, Evergrande, which is facing a liquidity crisis.


It has total liabilities of US$300bn and is trying to raise funding to stave off a crisis.


The latest development saw its onshore unit halt trading in all bonds after agencies cut their ratings on its paper.


China is also having an impact on the commodities market, with metal prices falling after the country said it would release more of its reserves to tackle supply shortages.


So mining companies are dominating the FTSE 100 fallers.


Rio Tinto PLC is down 2.17%, Anglo American PLC is off 1.59%, Antofagasta PLC has fallen 1.09% and BHP PLC has lost 0.93%.


But the biggest faller is Burberry PLC, which has been weak for days on the potential slowdown in Asia, one of its key markets.


Its is now another 2.42% lower.


The FTSE 100 however remains positive, up 32.99 points or 0.47% at 7049.48.


9.23am: Defence companies in the spotlight


Confrontation with China is clearly seen by the market as a good thing for the UK defence industry.


So it is with the announcement that the US, UK and Australian governments are setting up a trilateral security partnership called Aukus which will in part build new nuclear powered submarines.


The UK statement on the deal included the following: “The UK has built and operated world-class nuclear-powered submarines for over 60 years. We will therefore bring deep expertise and experience to the project through, for example, the work carried out by Rolls Royce near Derby and BAE Systems in Barrow.”


As a result, Rolls-Royce PLC shares are leading the FTSE 100 risers, up 3.51% or 3.7p to 109.2p.


BAE Systems PLC is 1.02% better at 554.6p.


Overall the FTSE 100 is holding on to its gains, up 34.22 points or 0.49% at 7050.71.


8.29am: Markets open in the green


Investors in the UK decided to take succour from recent US manufacturing and inflation data that were more benign than expected rather than the unfolding slowdown being experienced in China, the world’s economic growth engine.


As a result, the FTSE 100 opened 31 points to the good at 7,047.46.


“The generally positive opening was led by some strength within cyclical shares, although the moves were unconvincing,” said Richard Hunter, head of markets at Interactive Investor.


“The indices nonetheless remain ahead in the year to date, with the FTSE100 having added 9% and the FTSE250 14.8%.


“Even so, with the known issues now on the table and potentially priced in, the next catalysts could either come from renewed signs of a global economic bounce back, or the third-quarter reporting season providing positive shocks in the first weeks of October.”


The mining stocks were on offer following the latest lacklustre Chinese data with Anglo American, off 1.5%, leading the early fallers. Burberry, which also has big exposure to the country, was an early casualty too.


On the flipside, traders reacted positively to first-quarter results from the US-focused plant hire group Ashtead, whose shares opened 2.5% higher.


6.50 am: FTSE 100 seen a sliver higher


The FTSE 100 is set to start Thursday a sliver higher after US stock indices moved higher, and, this morning Asian markets turned lower.


CFD firm IG Markets sees the FTSE 100 around 2 points higher, making the price 7,030 to 7,033 with just over an hour to go until the open.


US markets were boosted on Wednesday as key regional manufacturing statistics significantly beat expectations, raising sentiments ahead of the American economy’s big-ticket economic release of the week – monthly retail sales data due later today.


“Overall, the week is going to plan thus far. As expected, markets, particularly in the US, are cherry-picking news headlines and tier-2 data to fit the narrative of flip-flopping daily sentiment,” OANDA market analyst Jeffrey Halley said in a note.


“Hopefully, next week’s cast of thousands line-up of central bank policy decisions, staring the Federal Reserve, delivers more thematic clarity. In the meantime, I shall leave my earplugs in to drown the noise and continue to believe in the gospel of buying-the-dip in a central bank-primed, unlimited money at zero per cent world.”


The Dow Jones rose by 236 points, 0.68%, to finish Wednesday at 34,814 whilst the S&P 500 gained more, rising 0.85% to 4,480.


The Nasdaq similarly added 0.8% as it climbed 123 points to a close of 15,161.


Elsewhere the small-cap centric Russell 2,000 index was strongest, stepping up 1.1% to 2,234.


Around the markets


The pound: US$1.3834, down 0.04%


Gold: US$1,790 per ounce, down 0.27%


Silver: US$23.82 per ounce, down 0.45%


Brent crude: US$US$75.65 per barrel, up 2.7%


WTI crude: US$72.76 per barrel, up 3.2%


Bitcoin: US$48,347, up 4.47%


Ethereum: US$3,639, up 7.35%


6.50am: Early Markets – Asia / Australia


Stocks in the Asia-Pacific region were mostly lower on Thursday as Australia’s unemployment rate fell to 4.5% on a seasonally adjusted basis in August, lower than the 4.9% forecast in a Reuters poll.


Australia’s S&P/ASX 200 gained 0.66% by the last hour of trading, with the Australian Bureau of Statistics attributing the decline in unemployment to a large fall in participation during the recent lockdowns rather than strengthening of labour market conditions.


China’s Shanghai Composite slipped 0.67% and Hong Kong’s Hang Seng index slumped 1.81%.


In Japan, the Nikkei 225 dipped 0.69% while South Korea’s Kospi fell 0.53%.


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