Must read: China lifts FTSE 100, crypto, Shell, Topps Tiles

Events overseas continue to influence UK stocks. Our head of investment has the details.

GLOBAL MARKETS

Risk-on sentiment has lifted European equities this morning boosted by a rally overnight in China after the health authorities held a briefing this morning in response to the recent rare protests. The oil & gas sector is outperforming thanks to a strong rebound in Brent and WTI.

The FTSE 100 is staging gains with China-sensitive stocks such as Prudential (LSE:PRU) and the miners outperforming, lifted by the rally in Asia overnight. Cable (GBPUSD) is trading higher on the back of US dollar weakness as investors shift away from safe-havens, while EURUSD is also in the green.

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CHINA

After Monday’s losses, Chinese markets are staging gains with the Hang Seng surging more than 5%, the Shanghai Composite rallying over 2% and the Hang Seng Tech Index up by more than 5.5%.

Markets were pushing higher overnight in anticipation of this morning’s Covid briefing held by China’s health authorities at 3pm local time in which they announced plans to increase vaccinations for the elderly and to reduce the time gap between basic vaccination and boosters to three months for those aged 80 and above. The authorities insisted that people’s complaints are about extra Covid measures and a one size fits all approach rather than the measures themselves.

Chinese Covid vaccine company CanSino Biologics (SEHK:6185) jumped more than 6% after China announced plans to ramp up its vaccination efforts. The Chinese yuan is also rallying by around 0.6% against the US dollar as the risk-on mood dampens investor appetite for the greenback. Oil prices are catching a bid, rebounding from Monday’s 11-month low, with WTI and Brent up by around 2.5% boosted by improved sentiment towards demand from China.

CRYPTO

Crypto company BlockFi has filed for Chapter 11 bankruptcy protection. The lender was hit by its substantial exposure to the FTX crisis earlier this month. BlockFi’s competitors Celsius Network and Voyager Digital also filed for bankruptcy earlier this year, weighed down by the volatile cryptocurrency market backdrop.

It has been a very tough year for crypto investors with bitcoin and ether down by more than 70% off the highs from just over one year ago amid the market volatility as well as the macroeconomic and geopolitical uncertainties that has resulted in a shakeout for riskier assets. With rising inflation and tightening monetary policy, the era of cheap money is well and truly over, taking much of the froth from the markets with crypto and technology suffering heavy losses as a result.  

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Meanwhile, BlockFi also announced plans to sue a holding company owned by FTX founder Sam Bankman-Fried in an attempt to recover its shares in RobinHood. It is understood that FTX was BlockFi’s second largest creditor.

The crypto compex is trading higher this morning with ether, bitcoin, XRP and Litecoin all staging gains, shrugging off the BlockFi bankruptcy, instead focusing more on the risk-on sentiment that has lifted equities and oil prices overnight.

SHELL

Shell (LSE:SHEL) has announced plans to acquire Denmark’s Nature Energy, Europe’s largest biogas producer for 1.9 billion euros. It comes as the oil giant looks for ways to diversify away from fossil fuels and follows BP (LSE:BP.)’s similar acquisition of US biogas producer, Archaea Energy for $4.1 billion last month.

With increased focus on the energy transition and climate change, green energies are a major growth avenue for oil and gas giants like Shell and BP particularly given the lack of long-term investment in fossil fuel projects. Plus, they can also help with energy security, reducing the West’s dependence on Russia for natural gas. Biogas is an alternative to natural gas but is produced using agricultural and other waste.

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Shares in Shell have outperformed this year, rallying by over 40% since the start of January driven by the back of the war in Ukraine which has boosted oil prices and profits.

TOPPS TILES 

Shares in Topps Tiles (LSE:TPT) are trading higher after full-year revenue increased to £247.2 million versus £228 million last year, its second year of record sales. Adjusted pre-tax profit increased by 4% to £15.6 million and it said trading in the first eight weeks of the new financial year had been robust with like-for-like sales up 3.4%.

Despite the macroeconomic pressures from rising costs and a slowing economy, Topps Tiles managed to enjoy a top and bottom-line boost, lifting shares by almost 5% offsetting some of this year’s slide. Topps Tiles has been caught up in the broader market turmoil and the particular stress on retail given the cost-of-living pressures that are weighing on consumers’ disposable income. The stock is down by more than 36% so far this year, sharply underperforming the wider UK market and even faring worse than other retailers like Kingfisher.

Topps Tiles fared very well during the pandemic when the stay-at-home DIY boom saw the retailer post record full-year sales. It has managed to log a second year for record revenue even though the pandemic tailwind is fading. The retailer has been focusing on sales to professional tradespeople and on its more profitable, core stores, allowing Topps Tiles to offer an upbeat assessment of its outlook, despite the macroeconomic challenges.