FTSE 100 loses early gains on China fears as oil price slides again

An early rally after Tuesday’s plunge has fizzled out, with the UK’s leading index slipping into negative territory again.

There were a few bright spots in the falling FTSE 100 (unlike on Tuesday when only engineer Meggitt managed to make any gains as global markets including Wall Street tumbled).

Equipment hire group Ashtead has added 45p to 962p after it reported a 20% rise in first quarter revenue to £539.6m and said it was on track to reach its full year target. In a buy note, Investec said:

Despite concerns over comments from its main peer and wider concerns on the US macro outlook, this was another strong quarter of growth ahead of its end markets. In the US, Sunbelt delivered 23% rental only revenue growth, with A-Plant in the UK seeing a 10% rise. The group continues to take market share, its end markets are still in recovery mode and importantly, structural growth is still prevalent. On this basis and given the current rating at a 2016 estimated PE of 11.7 times and sub-6 times enterprise value/EBITDA, we reiterate our positive stance.

Hikma was 99p higher at £23.24 after a positive note from Barclays in the wake of the pharmaceutical group’s $2.65bn purchase of the generics drug division of US business Boehringer Ingleheim. The bank said:

At a point when the market was fixated on [key product] colchicine, and unfounded claims that growth was over-reliant on shortage situations, Hikma has transformed its US exposure and long-term visibility through the $2.65bn acquisition of Roxane. Boosting outer year earnings by more than 20%, the deal revolutionises future opportunities... It marks the second transaction between Hikma and Boehringer so begs the question what is next, and with a major influx of R&D personnel the long term growth profile is significantly de-risked. We raise our price target to £27.60 [from £20.50] on the relatively de-risked investment case.

With Boehringer owning around 17% of Hikma [it] could benefit from further expansion of the relationship via: i) becoming Boehringer’s future authorized generic partner, ii) distributing Boehringer products in the Middle East and North Africa, and iii) potential future biosimilar collaboration.

Meanwhile chip designer Arm is up 16.5p to 930p as JP Morgan Cazenove moved from underweight to neutral.

Tesco has edged up 0.05p to 185.45p on reports it has picked private equity firm MBK Partners as the preferred bidder for its South Korean business.

But overall the FTSE 100 is faltering again, down 16.10 points at 6042.44, ahead of US jobs data later which could give further clues as to the timing of a Federal Reserve rate rise. More significantly, Friday sees the US non-farm payroll numbers, which have the potential to cause more volatility. Meanwhile Chinese markets are closed until Monday due to celebrations to mark Japan’s defeat in World War II.

Commodity companies were under pressure again as the fears of a slowdown in China hit metal and oil prices. Brent crude is currently down another 1.69% at $48.72.

Royal Dutch Shell B shares are down 30p at £16.16 while BP is 4.8p lower at 344.6p.

Among the miners Glencore continues to decline, down another 6.55p at 126.95p on financing concerns.

Asia focused HSBC is down 6.55p at 492.45p and Standard Chartered is 10p lower at 714.2p on contining concerns about emerging markets.

Lower down the market Halfords has lost 41p to 469p after weaker bicycle sales, although it said it was still on course to meet profit forecasts. Peel Hunt said:

While the performance of Halfords’ cycling division was undoubtedly disappointing in the second quarter, the fundamentals of the investment case have not changed. Cycling remains a growth market in the medium and long term, and crucially, cash generation is extremely strong here. The company will be cash- positive by 2018 and a material cash distribution is possible in the next few years. While today’s news is unfortunate, we would use the weakness as a buying opportunity.