FTSE 100 falls on China devaluation

(MENAFN- ProactiveInvestors)Market Close London's blue chip stocks dived shortly after the US markets opened as China's second currency devaluation in two days battered shares. Connor Campbell at spread-betting firm Spreadex said: 'The US open only helped intensify the sell-off this afternoon with the yuan devaluation continuing to suffocate the markets as China cemented its position as the new market bogeyman the seat still warm from Greece's tenure.' The currency hit four-year lows after a raft of downbeat data including another slowdown in industrial production expansion to 6%. David Rees at Capital Economics said: 'A second reduction in the renminbi's reference rate against the dollar today has reinforced fears that China is readying itself for a currency war and/or that its economy is running off a cliff.' Markets across Europe were affected with the French Cac40 losing 3.4% to 4925 while the German Dax shed 3.2% to 10933. The FTSE 100's losses seem less drastic easing 1.4% or 93 points to 6541 after a last minute spike softened the blow. Miners took a hit on fears of lower demand for metals. Glencore (LON:GLEN) reversed 11p to 180p BHP Billiton (LON:BLT) subsided 6p to 1143p and Anglo American (LON:AAL) declined 7p to 768p. Meanwhile disappointing UK job data failed to buoy sentiment with unemployment rising for the second month in a row. Samuel Tombs at Capital Economics said: 'All indicators suggest that the rate at which slack in the labour market is been used up has eased significantly indicating that the economic recovery is now being largely fuelled by productivity not employment growth.' In corporate news publisher Pearson (LON:PSON) dropped 5p to 1168p following the sale of its stake in The Economist magazine for £469mln. Sticking on the FTSE 100 security group G4S (LON:GFS) rose 1.5p to 268p after it reported an upbeat first-half report. The underlying picture was a reasonably reassuring one with first-half revenues and profits ahead (albeit marginally) and in line with forecasts. Away from the index Centamin (LON:CEY) reported its pre-tax profit rose in the first half of 2015 leading the company to hike its interim dividend by 11%. Shares climbed almost 7% to 58p. In small caps African Potash (LON:AFPO) was on the rise again after its non-executive directors agreed to accept shares in lieu of cash for services rendered thus far this year. Shares climbed 21% to 0.84p. Meanwhile Kibo Mining (LON:KIBO) said a second phase study for the coal mine at its Mbeya thermal power project in Tanzania has improved on the original concept in key areas. Shares were 13.2% higher to 4.67p. Conversely Tribal Health (LON:TRB) struggled after it reported  that adjusted profit before tax more than halved to £2.0mln in the first half of 2015. Shares dropped 9.6% to 146p. US Open The global sell-off in equities continued Wednesday and US shares started decidedly lower as traders took flight after China's second currency devaluation in two days. The People's Bank of China let the yuan drop again overnight fixing the currency 1.6% below Tuesday's close following the 1.9% devaluation a day ago. In corporate news stateside the big stories were that e-commerce giant Alibaba which listed in New York to much fanfare last year and retail giant Macy's - both had earnings reports out. At the time of writing the benchmark Dow Jones was down 205 points at 17199 the Nasdaq was down 62 to 4973 and the broader based S&P500 lost 21 to 2063. All three lost over 1%. Meanwhile in London stocks were also taking a hit with the FTSE100 losing 97 points or 1.45%. Some experts reckon the latest Chinese situation could trigger the worst global sell-off since the meltdown of 2008. Chris Beauchamp analyst at London spreadbetters IG said: "China appears to have discovered a love for active FX intervention. "Once is an experiment but twice makes it a trend. The spectre of currency wars was worrying enough yesterday but today it looks real enough to touch." In company news e-commerce giant Alibaba (NYSE:BABA) slipped almost 6% to US$72.71 as revenue growth in its latest quarter missed analysts' numbers. For the three months to end June revenues at the group rose 28% year-on-year to US$3.26billion (bn) but analysts had estimated a figure of US$3.39bn. It also unveiled a deal which will allow Chinese online shoppers to buy Macy's (NYSE:M) merchandise. Speaking of the famous retail store its shares plunged almost 4% as the largest U.S. department-store chain reported fiscal second-quarter revenue and profit that trailed market expectations and it lowered its full-year sales outlook. Adjusted earnings were $0.64 per share in the 13 weeks ended August 1 the Cincinnati Ohio-based company said in a statement today. That result missed the $0.76 average estimate of 20 analysts polled by Capital IQ. Overall net income fell to $217 million or $0.64 per diluted share in the quarter from $292 million or $0.80 per diluted share a year earlier. Kirkland Lake Gold (TSE:KGI) added 5.36% to US$5.50 in Toronto trading after announcing it produced 41482 ounces of gold for the three months ending July 31 the first quarter of its stub year 2015 (May 1 to December 31 2015). Fossil Group (NASDAQ:FOSL) fell earlier but added 1.25% despite it posting downbeat second-quarter revenue and cut its outlook for the year weighed by currency headwinds. In smaller caps Eleven Biotherapeutics (NASDAQ: EBIO) raced up 229% to US$7.70 after it told investors the first patients had been dosed with EBI-005 in Phase 3 Study in Patients with moderate to severe allergic conjunctivitis. On the losing front cloud computer and storage firm Netlist (NASDAQ:NLST) sank over 16% to US$0.42 as it posted second quarter results which appeared to disappoint. MID-SESSION MARKET WRAP China's second currency devaluation in two days hammered shares in Asia-focused companies on Wednesday. Luxury fashion house Burberry (LON:BRBY) fell 40p to 1496p as traders worried that Chinese consumers would have less spending power. Shares in upmarket European car makers dropped on fears of lower demand with BMW losing 3% to €86.6. Asia-focused bank Standard Chartered (LON:STAN) backtracked 25.7p to 881.4p. Miners also took a hit on fears of lower demand for metals. Lonmin (LON:LMI) fell 2.7p to 38.9p Glencore (LON:GLEN) reversed 9.7p to 181.3p BHP Billiton (LON:BLT) subsided 12.5p to 1136p and Anglo American declined 7p to 767.8p. The FTSE 100 Index dropped 78.37 points to 6586 as the People's Bank of China devalued the yuan by 1.6 percentage points. The currency hit four-year lows after a raft of downbeat data including another slowdown in industrial production expansion to 6%. Analysts said the move would fuel concern that global currency wars could curb world growth prospects and delay a US interest rate rise. Jim Reid at Deutsche Bank said: "A full-blown China devaluation would surely stop the Fed dead in its tracks and even the threat of it may slow it down." Disappointing UK job data failed to buoy sentiment with unemployment rising for the second month in a row. Warwick Business School economist Ben Knight said the figures were worrying. "The recovery has been rather unbalanced and heavily reliant on strong demand from consumers encouraged by low interest rates to spend and borrow more" he said. "The prospect of higher rates may have dampened the growth in demand. "If the government does nothing the danger is that the slowdown in the UK economy might become more entrenched." There was upbeat news from Greece however where negotiators reached a provisional €85bn rescue deal ahead of schedule. Oil giants pared earlier losses as the price of a barrel of US light crude moved further above the $43 mark. BP (LON:BP.) gained 1.9p to 382.4p and Royal Dutch Shell (LON:RDSB) rose 8p to 1886.5p. In company news publisher Pearson (LON:PSON) dropped 3p to 1170p following the sale of its stake in The Economist magazine for £469mln. support services group Interserve (LON:IRV) backtracked 26.5p to 599p as margin performance in UK construction fell short of its medium-term expectations. Security group G4S (LON:GFS) softened 0.5p to 266.2p after it reported flat underlying profits in emerging markets in an otherwise upbeat first-half report. Investors built stakes in Zoopla (LON:ZPLA) by 10.1p to 264.4p as its UK agency business returned to growth. In small caps shares in CentralNic (LON:CNIC) jumped after Proactive Investors broke the story that Google's name change to Alphabet included changing the domain name to abc.xyz. The register for the .xyz domain is run by CentralNic although it is unclear how much it stands to make from the domain. Shares climbed 22.6% to 51.5p. Elsewhere Kibo Mining (LON:KIBO) said a second phase study for the coal mine at its Mbeya thermal power project in Tanzania has improved on the original concept in key areas. In particular the all-in cost margin improved to between 49% - 62% from 38% - 45% and compares with the 25% usually considered "healthy" for this type of project.  Shares jumped 15.15% to 4.75p. ServicePower (LON:SVR) has won new contracts with three major North American companies boosting it by 0.4p to 5.5p. Conversely wood chip provider Active Energy (LON:AEG) has been hit by a double whammy of a temporary spike in local timber prices and some production line difficulties (now resolved). Shares dipped 12% to 5.5p. MOST FOLLOWED You say yuan I say renminbi. Let's call the whole thing off. To have one Chinese currency devaluation is unfortunate but to have a second the day after smacks of carelessness. Enough with the tepid allusions and on with the serious business of speculating on just how bad a shape the Chinese economy is in after the People's Republic devalued its currency for the second day in succession after the People's Bank of China called Tuesday's reset a 'one off depreciation'. It's all relative of course and the Chinese economy is still enjoying the sort of growth levels that mature economies in the West would love to achieve but it has not helped matters that China's factory output for July also missed expectations. 'China appears to have discovered a love for active FX intervention. Once is an experiment but twice makes it a trend' suggested Chris Beauchamp senior market analyst at spread betting firm IG. 'The spectre of currency wars was worrying enough yesterday but today it looks real enough to touch. A single move might have passed without reaction from China's trading partners but now it looks like a tit-for-tat move by others in the region is certain. When such moves are on the cards the logical reaction from investors is to seek shelter in bonds which is exactly what is happening now' he added. 'A weakening yuan hits US exports to China putting the brakes on US economic growth and thus potentially causing the Fed to stay its hand. September's rate hike looks much less likely this morning than it did just 48 hours ago' he opined. Closer to home the garage sale being held by Pearson (LON:PSON) continues with the group selling its stake in The Economist Group for £469mln. The sale of the iconic Penguin Random House cannot be far off and headline writers have their 'P-p-p-pick up a Penguin' headlines at the ready. The Constriction Enquirer sounds like a publication ripe for inclusion on the BBC's Have I Got News For You programme but its report on the results from Interserve (LON:IRV) is currently enjoying a high search ranking. The trade mag reports that the firm's construction operating margins slump to 1.1% during the first half of the year from 1.9% last time as the market remained 'challenging'. Interserve's stock market statement spoke of something called 'tender pricing' which apparently is improving but also grumbled about the imminent rise in the minimum wage which could hit profits next year. The company made profit before tax of £33.7mln in the first half of the year but with around 80000 employees – admittedly not all of them in the UK – the enforced pay rise could put a noticeable dent in those profits. Then again a scan of Interserve's annual report reveals that salaries for executive directors in the last financial year rose by between 7.3% and 22.6% which even the remuneration committee's report acknowledges has 'the potential to appear high in a wider market context'. Chief executive Adrian Ringrose base salary £550000 a year said: 'We expect the premium to the National Minimum Wage announced in the recent Budget to have an initial adverse impact on margins in the UK Support Services segment of £10-15 million in 2016 receding over the next few years thereafter as the change is priced in to relevant contracts.' Among the small caps digital marketing continues to be a hot topic with interactive gaming company Netplay TV (LON:NPT) the latest to make a move in the sector. It has acquired Otherside an online marketing product development and technology company for £3.2mln. Among the benefits of the deal cited by Netplay are the provision of a 'robust media platform' and synergies with Netplay's existing operations. LONDON OPEN Blue-chip shares took a dive in early trading on Wednesday after the second devaluation of China's currency in as many days. The FTSE 100 Index dropped 76.95 points to 6587 as the People's Bank of China devalued the yuan by another two percentage points. The currency hit four-year lows after a raft of downbeat data including another slowdown in industrial production to 6%. Analysts said the move would fuel concern that global currency wars could curb worldwide growth prospects and delay a US interest rate rise. Jim Reid at Deutsche Bank said: "A full blown China devaluation would surely stop the Fed dead in its tracks and the even threat of it may slow it down. "The probability of a September US hike went down from 48% before the announcement (and 54% late Monday) to 40% currently." The news looked set to render UK job data insignificant in the wider scheme of things. Connor Campbell at spread-betting firm Spreadex said: "Wage growth claimant count change and the unemployment rate are all expected to be the same-or-worse than their last set of figures and will likely just exacerbate the FTSE's misery as the morning goes on." It also put upbeat developments in Greece in the shade as negotiators reached a provisional €85bn deal ahead of schedule.  The news shook miners. Lonmin (LON:LMI) fell 2.3p to 39.3p Glencore (LON:GLEN) reversed 10.75p to 180.25pRio Tinto (LON:RIO) was off 74p at 2479.5p BHP Billiton (LON:BLT) subsided 35.5p to 1113p and Anglo American declined 27.9p to 746.9p. Oil giants were also down as the price of a barrel of US light crude hovered just above the $43 mark. BP (LON:BP.) lost 3.75p to 376.75p and Royal Dutch Shell (LON:RDSB) leaked 15.5p to 1863p. In company news support services group Interserve (LON:IRV) backtracked 28p to 597.5p as it said margin performance in UK construction fell short of its medium-term expectations. Security group G4S (LON:GFS) softened 2.5p to 264.2p after it reported flat underlying profits in emerging markets in an otherwise upbeat first-half report. Investors built stakes in Zoopla (LON:ZPLA) by 5.8p to 260.1p as its UK agency business returned to growth. In small caps shares in CentralNic (LON:CNIC) jumped after Proactive Investors broke the story that Google's name change to Alphabet included changing the domain name to abc.xyz. The register for the .xyz domain is run by CentralNic although it is unclear how much it stands to make from the domain. Shares climbed 22.3% to 51.4p. Elsewhere Kibo Mining (LON:KIBO) said a second phase study for the coal mine at its Mbeya thermal power project in Tanzania has improved on the original concept in key areas. In particular the all-in cost margin improved to between 49% - 62% from 38% - 45% and compares with the 25% usually considered "healthy" for this type of project.  Shares jumped 14.4% to 4.7p. In other news ServicePower (LON:SVR) has won new contracts with three major North American companies. The new customers were described as 'recognised brands' though only one JVCKENWOOD was named. Shares rose 4.8% to 5.37p. Conversely wood chip provider Active Energy (LON:AEG) has been hit by a double whammy of a temporary spike in local timber prices and some production line difficulties (now resolved). Shares dipped 12% to 5.5p. MARKET PREVIEW London's blue chips are heading for another tough morning after heavy falls overnight for shares in the US. Financial spread bet firms see FTSE 100 shedding around forty points when trading starts to follow a 71 point fall to 6665 on Tuesday. China's unexpected devaluation sparked a rout across the globe yesterday on fears it will start further devaluations in retaliation and put the squeeze on other emerging markets. US markets were badly affected with the Dow Jones Industrial Average shedding 212 points to 17403 with similar percentage falls for the two other main US indices Nasdaq and the S&P 500. Chart watchers say the Dow Jones indicated a 'death cross' on Tuesday where the 50 day moving average dips below the 200-day average something that happens rarely and has been followed previously by more falls. News of a US$100mln racket to hack sensitive company press releases before they was published also unsettled US investors. Asian markets also took a battering after the Chinese currency move and worries over the impact on other countries in the region. The Nikkei in Tokyo fell 1.4% Hong Kong almost 2% though Shanghai held up relatively well and dipped by 0.15%. UK companies with large Asian interest such as Burberry reacted badly yesterday and are likely to be among the fallers today as well. Company updates are due today from security outfit G4S which follows a mixed update from rival Serco yesterday. Contractor Balfour Beatty and car dealer Lookers also report. Share