|By Jonathan Guthrie, City Editor|
Art provocateur Banksy is opening a “bemusement park” called “Dismaland”, according to Reuters. Markets got there before him, thanks to the slide in Asian stocks and their knock-on effect on shares elsewhere. The Hang Seng and Nikkei 225 both slipped earlier today on weak Chinese manufacturing numbers, as you can see below.
The FTSE-100 has lost around 6 per cent over the last month and investors are braced for further losses today. Asia-focused fund managers and banks are sharply lower on the month. One-time investor’s darling Ashmore is down 12.3 per cent, Martin Gilbert’s Aberdeen Asset Management has tumbled 20 per cent and Standard Chartered is adrift by the same amount, according to S&P CIQ.
Worries concerning the overheated Chinese economy, a background chatter in recent years, have become deafening. It will be a long, slow unwind, pulling back a UK market where price earnings ratios had run ahead of themselves. Takeovers in the mid-teen price-to-ebitda range were becoming a common event.
We hear that at least three big private equity firms, whose business models are cyclically biased, are in the process of raising top-of-the-market funding. They’d better get their skates on in the circumstances. It will be interesting to see whether any agreed takeovers with long completion periods – Shell’s purchase of BG springs to mind – can or should be revisited in relation either to their terms or advisability.
GSK and Novartis sitting in a tree, K-I-S-S-I-N-G. The British drug company is selling its rights in auto-immune treatment ofatumumab (must be a great job thinking up names like that) to its special Swiss friend for up to $1bn. There’s just a hint here of “no, darling, you put the phone down first!” The pair completed a $20bn asset swap earlier this year and M&A imagineers wonder whether they should have gone further, given consolidation in the sector. Perhaps they still will.
Hospitals group Spire Healthcare has announced a 9.5 per cent increase in half-year operating profits to £50.6m. Rob Roger, CEO, warns of “near-term weakness” in NHS demand. The relationship of private hospitals and the NHS is complex, with the state contributing to earnings as well as crowding out some otherwise profitable activities.
Banco Sabadell is hoovering up remaining shares it does not own in TSB under the compulsory purchase rules. Emirates National Oil Company, who Baillie Gifford forced to up its offer for Dragon Oil, is commencing a squeeze-out of its own.
As for Banksy, he is quoted as saying that Dismaland is in no way a satire on Disneyland. Yeah, right. The installation features the effigy of a pensioner attacked by seagulls and a boating lake crowded with migrants. A bull, exiting pursued by a bear, would complete the scene nicely.
The deepening concern about the extent of China’s economic slowdown is setting a tense tone across global markets.
The worries followed the weakest reading since 2009 for an economic gauge which plots the strength of the country’s dominant manufacturing sector. The Caixin China purchasing managers’ index fell to 47.1 for August, down from 47.8 in July, leaving it mired further under the 50 line that separates expansion from contraction. It was also weaker than forecasts of 48.2. The first reading of the survey showed output, new orders, exports and employment all decreased. It will be revised for a second publication on September 1.
The Shanghai Composite fell by over 4 per cent and traded under the closing low it reached on July 8. In Hong Kong, the Hang Seng index is trading down 2.3 per cent. Its weekly decline is around 7 per cent, its worst performance in four years.
Overnight in New York, stocks hit a six month low as investors sold off equity positions and raced into haven assets. The S&P 500 slid 2.1 per cent to 2,035.76, the largest one-day decline since February 2014.Twitter was among those having a rough of go of it, with shares in the company slipping below its $26 November 2013 IPO price. Meanwhile, Valeant bought Sprout, the maker of the recently federally approved "female Viagra", for $1bn, and activist investor Nelson Peltz muscled his way onto the board of Sysco, the food company.
There will be insight into the eurozone’s economic performance from the region’s own purchasing managers’ indices, due out throughout the morning. The reading from across the shared currency area from both the manufacturing and services sectors as a whole is expected to remain around levels just over 50 reached in July, with the possibility of slight declines relating to the appreciation of the euro but offset by falling oil prices.
The UK’s public sector net borrowing requirement for July, published at 9.30am, is expected to fall sharply from June’s £9.4bn, because July tends to be a strong month for tax receipts. Last year’s figure for July was £107bn, and the UK’s economic rebound means it should post a noticeable decline for 2015.