London stocks were once again in the red by the close on Thursday, reversing their lunchtime gains as recession fears continued to weigh on sentiment and as investors sifted through a raft of UK data.
The FTSE 100 ended the session down 0.97% at 7,020.45, and the FTSE 250 was off 1.05% at 18,692.98.
Sterling was in a mixed state, meanwhile, last trading 0.15% weaker against the dollar at $1.2248, while it strengthened 0.34% on the euro to €1.1644.
“After yesterday’s falls European markets were already looking vulnerable over rising concerns about a global slowdown,” said CMC Markets chief market analyst Michael Hewson.
“These fears have been further exacerbated after the latest flash PMIs from Germany and France pointed to further economic weakness in June, raising the prospect that both economies could well be sliding into recession.
“The DAX has been worst affected after the German government triggered the second phase of its emergency gas plan, over concerns that the economy could well see an energy shortage due concerns that Russia could cut gas supplies heading into the winter months.”
Hewson noted that the benchmark German index had slipped to new three-month lows, as it looked to “pitch back” towards the levels last seen in March in the aftermath of Russia’s initial invasion of Ukraine.
“The FTSE 100 has also slipped back on similar concerns about the global economic outlook with the worst performing sector being real estate, as well as basic resources.”
In economic news, a closely-watched survey showed UK activity stalling in May, weighed down by a slowdown in manufacturing.
The S&P Global/CIPS UK PMI composite output index was 53.1 in June, unchanged on April’s 15-month low; consensus had been for a fall to 52.4.
Within that, the services PMI business Activity index was unchanged at 53.4, also ahead of consensus.
But manufacturing output edged lower to 51.2, a 16-month low, from 51.6, while the manufacturing PMI fell from 54.6 to a 23-month low of 53.4, marginally below expectations.
Rising costs and concerns about the wider economic outlook also meant optimism continued to decline, leaving it at its lowest level for just over two years, while the new orders index fell to 50.8 – the lowest since February 2021.
“The economy is starting to look like it is running on empty,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
“Current business growth is being supported by orders placed in prior months, as companies report a near-stalling in demand.
“Manufacturers in particular are struggling with falling orders, especially for exports, and the service sector is already seeing signs of the recent growth support from pent-up pandemic demand moving into reverse amid the rising cost of living.”
Williamson argued that the UK looked set for a “troubling combination of recession and elevated inflation as we move into the second half of the year”.
Elsewhere, a survey showed retail sales falling in June, as surging inflation weighed heavily on demand.
According to the latest CBI distributive trades survey, the retail sales volumes balance slipped in the year to June, to -5% from -1% in May.
Sales were also seen as poor for the time of year in June, with a balance of -19% compared to zero in May, and were expected to remain below seasonal norms in July.
“Retail volumes are struggling, as high inflation eats away at consumers’ budgets,” said Ben Jones, lead economist at the Confederation of British Industry.
“The squeeze on household incomes appears to have offset any boost to activity from the extended Platinum Jubilee bank holiday earlier this month.
“There are also clearer signs that a downturn in consumer spending is beginning to ripple out across the wider distribution sector, with wholesalers seeing a 14-month period of robust sales growth come to a grinding halt this month.”
Public sector borrowing, meanwhile, exceeded forecasts in May, after surging inflation pushed up debt interest costs.
The Office for National Statistics said public sector net borrowing, excluding public sector banks, was £14.0bn last month, well above forecasts for £12.0bn and the third-highest May borrowing since records began in 1993.
The figure was down £4.0bn on May 2021, but £8.5bn higher than May 2019, before the pandemic.
It was also £3.6bn higher than the Office for Budget Responsibility’s own forecast.
Across the pond, output from America’s private sector increased in June at its slowest pace since the appearance of the Omicron variant of Covid-19 in January and was at its second-softest since July 2020.
S&P Global’s composite output index for US factory and services sectors declined from a reading of 53.6 in May to 51.2 for June – plumbing a five-month low.
While it said the decline in business confidence added to the risk of recession, price gauges contained in the surveys also suggested that inflation had peaked.
On London’s equity markets, warehousing technology developer and online grocer Ocado Group jumped 4.34%, having tumbled on Wednesday on expectations that it would lose out to discounters such as Aldi and Lidl as the cost-of-living crisis intensified.
Elsewhere, Rentokil Initial was boosted 1.43% by an upgrade to ‘buy’ at Deutsche Bank, while Capricorn Energy was lifted 0.28% by an upgrade to ‘buy’ at Stifel.
GSK managed gains of 0.81% after it said it would invest £1bn over 10 years, to accelerate research and development into infectious diseases such as malaria and tuberculosis.
On the downside, gambling group 888 Holdings tumbled 8.33% after it said it expected interim revenues to be “broadly” in line with expectations, and down on the previous year.
Trainline slid 10.14% on news that chief financial officer Shaun McCabe was stepping down to join fast-fashion retailer Boohoo.
Airline holding group IAG was 2.81% lower, as check-in and ground handling staff employed by its British Airways subsidiary at Heathrow voted in favour of summer strike action in a dispute over pay.
Intertek Group was knocked 3.5% lower by a downgrade to ‘sell’ at Deutsche Bank, while FirstGroup was 3.01% weaker after a downgrade to ‘hold’ at HSBC.
United Utilities Group and British Land were both in the red, by 0.71% and 3.3% respectively, as they traded without entitlement to the dividend.
Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Abigail Townsend and Alexander Bueso.
Market Movers
FTSE 100 (UKX) 7,020.45 -0.97%
FTSE 250 (MCX) 18,692.98 -1.05%
techMARK (TASX) 4,213.24 -0.35%
FTSE 100 – Risers
Ocado Group (OCDO) 855.40p 4.34%
Hikma Pharmaceuticals (HIK) 1,546.50p 2.93%
BT Group (BT.A) 185.65p 2.26%
London Stock Exchange Group (LSEG) 7,464.00p 1.72%
Burberry Group (BRBY) 1,633.00p 1.71%
Avast (AVST) 524.60p 1.55%
Rentokil Initial (RTO) 466.60p 1.43%
B&M European Value Retail S.A. (DI) (BME) 377.70p 1.32%
Persimmon (PSN) 1,826.00p 1.00%
3i Group (III) 1,086.50p 0.93%
FTSE 100 – Fallers
Antofagasta (ANTO) 1,171.50p -5.83%
British Land Company (BLND) 477.50p -5.52%
Rolls-Royce Holdings (RR.) 81.85p -4.95%
WPP (WPP) 783.20p -4.65%
Pershing Square Holdings Ltd NPV (PSH) 2,360.00p -4.65%
Anglo American (AAL) 3,061.00p -4.55%
Barclays (BARC) 154.08p -4.50%
Fresnillo (FRES) 778.00p -4.33%
Smiths Group (SMIN) 1,380.00p -4.13%
NATWEST GROUP PLC ORD 100P (NWG) 219.10p -3.90%
FTSE 250 – Risers
Polymetal International (POLY) 187.00p 11.14%
Indivior (INDV) 303.20p 3.84%
Abrdn Private Equity Opportunities Trust (APEO) 430.00p 3.61%
Auction Technology Group (ATG) 922.00p 3.51%
ASOS (ASC) 887.50p 3.26%
Moonpig Group (MOON) 234.80p 2.62%
Frasers Group (FRAS) 644.00p 2.38%
Bellevue Healthcare Trust (Red) (BBH) 144.60p 2.26%
Fidelity China Special Situations (FCSS) 269.50p 2.08%
Royal Mail (RMG) 278.60p 1.86%
FTSE 250 – Fallers
Trainline (TRN) 284.60p -10.14%
888 Holdings (888) 160.70p -8.33%
Wood Group (John) (WG.) 165.45p -6.23%
Weir Group (WEIR) 1,377.00p -5.62%
Petrofac Ltd. (PFC) 119.80p -5.22%
Tullow Oil (TLW) 47.52p -4.58%
Mitie Group (MTO) 58.80p -4.55%
Hammerson (HMSO) 20.11p -4.28%
Bank of Georgia Group (BGEO) 1,438.00p -4.28%
Centamin (DI) (CEY) 80.42p -4.19%
