MARKET REPORT: London Stock Exchange Group shares tumble into the red as an uncertain outlook set off several alarm bells for investors
London Stock Exchange Group (LSEG) shares tumbled into the red as an uncertain outlook set off several alarm bells for investors.
The exchange operator’s income in the fourth quarter of this year was ‘not expected to grow as fast’ as the third quarter due to tough comparatives with the same period in 2020.
The group also joined the list of companies being hit by supply chain pressures sweeping the globe, saying the issues may impact the timing of some of its technology spending.
Writing on the wall: The exchange operator’s income in the fourth quarter of this year was ‘not expected to grow as fast’ as the third quarter
LSEG uses vast amounts of computer hardware such as servers to operate its exchanges and stock market data businesses. Many of these rely on semiconductors, small but powerful computer chips that are used in everything from iPhones to power steering in cars.
Semiconductors have been in short supply in recent months due to the factory closures during the coronavirus pandemic, soaring demand for computers used in home working and the lingering effects of a trade war between the US and China. Matters were not helped by a glitch that briefly knocked the exchange’s website offline, leaving thousands of investors in limbo over stock prices.
The outlook overshadowed positive figures for the company’s third quarter, which saw its income grow 7.6 per cent year-on-year helped by strong growth from capital markets and its market data arm Refinitiv, which it bought for £19.6billion in January.
Some analysts warned other factors, including the prospect of interest rate rises, could see LSEG’s business hit by falling demand for stocks.
‘Whilst interest rates have languished at record lows the stock market has been the only game in town but as inflation concerns push the Bank of England to consider a rate rise investors are waking up to the fact that the playing field is changing,’ said AJ Bell analyst Danni Hewson.
She added: ‘Some money will be siphoned off as options like bonds, gold and even good old savings accounts get another look.
‘Investors are considering the big picture right now, markets are volatile and at some point, the bargain hunters will have snapped up everything they’ve been looking for.’
LSEG’s shares slumped 6 per cent, or 484p, to 7600p.
The FTSE100 was up 0.2 per cent, or 14.25 points, at 7204.55 while the FTSE 250 added only 0.06 per cent, or 14.61 points, to close at 22931.66.
Reports that debt-laden Chinese property firm Evergrande paid £61m to some of its lenders eased fears that the company is facing an imminent default that could hit China’s economy. The news also offset an unexpected fall in UK retail sales last month.
As a result, blue-chip mining stocks, which rely on Chinese demand for raw materials such as coal and iron ore for large portions of their businesses, helped to lead the index higher.
Antofagasta climbed 0.5 per cent, or 7p, to 1437.5p, while Evraz rose 1.6 per cent, or 10p, to 633p, Polymetal International added 2.9 per cent, or 40.5p, to 1417.5p, BHP Group edged up 0.7 per cent, or 12.6p, to 1941p and Rio Tinto was up 0.5 per cent, or 23.5p, at 4672.5p.
Travel and leisure stocks were hit hard as Covid-19 cases continued to rise across the UK, sparking fears of new lockdown measures and restrictions.
British Airways owner IAG descended 2.6 per cent, or 4.1p, to 156.06p while Premier Inn owner Whitbread slumped 1.5 per cent, or 46p, to 3121p. Budget airline easyJet dropped 0.5 per cent, or 3.2p, to 596.6p while rival Ryanair dipped 0.7 per cent, or €0.12, to €15.97.
JD Sports rose 1.9 per cent, or 19.5p, at 1059p, as it struck a deal to enter the Greek market. The tracksuit and trainers retailer acquired an 80 per cent stake in Cosmos Sport, a Crete-based firm which operates 57 stores across Greece and Cyprus.