London stocks closed in the red on Wednesday, after a session which saw investors poring over the latest UK GDP figures, as well as better-than-expected jobs data from across the pond.
The FTSE 100 ended the session down 0.71% at 7,037.47, and the FTSE 250 was 0.74% weaker at 22,376.02.
Sterling was in a mixed state, last trading 0.22% weaker against the dollar at $1.3806, while it strengthened 0.15% on the euro to 1.1650.
“While the FTSE 100 is just in the red, the Dow has begun the day with a gain of 150 points following a strong private payrolls report,” said IG chief market analyst Chris Beauchamp.
“US stocks have managed to ignore the weak lead given by European markets this morning and are striding ahead, putting some clear water between them and struggling indices this side of the Atlantic.”
Beauchamp said a better-than-forecast ADP report gave a lift to the Dow, which had found the strength to close some of its recent performance gap with the S&P 500, with a strong performance from Goldman Sachs and Boeing doing much of the heavy lifting.
“Even with the reminder that today’s ADP figure in no way guarantees a strong nonfarm payrolls print on Friday, investors will still be looking for a reasonably-good number from the official stats from the BLS to match up with today’s private payrolls figure, if only to provide some confirmation that employment continues to recover at a reasonable pace,” Beauchamp said.
“Indeed, today’s report still fell into the ‘Goldilocks’ category, since it is moving in the right direction, but not at an overly-speedy pace, which explains the positive reaction from US stocks in early trading.”
Data released earlier by the Office for National Statistics showed the economy contracted a touch more than initially estimated in the first quarter, as households saved more during the third national lockdown.
Gross domestic product fell 1.6% between January and March, compared to an initial estimate of a 1.5% decline.
That was still 8.8% below pre-pandemic levels, revised from a first estimate of 8.7%.
The household saving ratio rose to 19.9% in the first quarter of 2021 from 16.1% in the fourth quarter of 2020, hitting its second-highest level on record after a 25.9% surge in the second quarter of last year.
“The small downward revision to first quarter GDP growth probably won’t stop the economy from rising back to its pre-pandemic peak in the coming months,” said Paul Dales, chief UK economist at Capital Economics.
“And the larger rebound in the household saving rate increases the potential for faster rises in GDP further ahead.”
Shop prices, meanwhile, fell in June, but inflationary pressures could force retailers to pass higher costs on to consumers soon, according to the British Retail Consortium.
Prices in stores dropped by 0.7% in June from a year earlier – faster than in May when the decrease was 0.6%, a BRC/NielsenIQ survey showed.
The decline was led by non-food, which dropped 1% in June compared to an 8% fall in May, with the drop reportedly caused by fashion and other retailers seeking to prolong the recent pickup in consumer spending.
“Retailers’ costs are continuing to mount due to global food price increases, Brexit red-tape, Covid related supply chain disruption, raw commodity shortages and increased shipping and petrol costs,” said Helen Dickinson, the BRC’s chief executive.
“The increasing cost burden on retailers may be passed on to the consumer, threatening price rises as the pressure mounts in the months ahead, especially with additional Brexit checks this autumn.”
Finally, the Bank of England’s Andrew Haldane warned in his last speech as its chief economist that policymakers risked losing control of inflation earlier in the afternoon.
At an event hosted by the Institute for Government, Haldane said that UK consumer price inflation was headed towards 4% by the end of 2021, and that everyone would lose should inflation expectations become unhinged as a result.
He said the Old Lady would be forced to play catch-up, hiking interest rates “materially” higher “or faster” in order to re-anchor people’s expectations.
“If this risk were to be realized, everyone would lose – central banks with missed mandates needing to execute an economic hand-brake turn, businesses and households facing a higher cost of borrowing and living, and governments facing rising debt-servicing costs,” he said in prepared remarks for the speech.
In equity markets, Dixons Carphone rose 5.94% after it reinstated its dividend, as it swung back to profit on the back of a massive boost in online sales of electrical goods during Covid lockdowns.
Opioid addiction treatment maker Indivior surged 6.4% after it lifted its 2021 guidance following a better-than-expected business performance through the first half the year.
In broker note action, Workspace was boosted 0.66% by an upgrade to ‘outperform’ at RBC, while on the downside, Cairn Energy was knocked 3.89% lower by a downgrade to ‘hold’ at Berenberg.
Market Movers
FTSE 100 (UKX) 7,037.47 -0.71%
FTSE 250 (MCX) 22,376.02 -0.74%
techMARK (TASX) 4,445.45 -0.29%
FTSE 100 – Risers
Compass Group (CPG) 1,522.00p 1.91%
Sainsbury (J) (SBRY) 271.80p 1.12%
Scottish Mortgage Inv Trust (SMT) 1,331.00p 0.76%
InterContinental Hotels Group (IHG) 4,810.00p 0.54%
Next (NXT) 7,856.00p 0.43%
Melrose Industries (MRO) 155.10p 0.42%
Land Securities Group (LAND) 675.40p 0.42%
Phoenix Group Holdings (PHNX) 676.40p 0.39%
Croda International (CRDA) 7,368.00p 0.35%
Rolls-Royce Holdings (RR.) 98.92p 0.34%
FTSE 100 – Fallers
Prudential (PRU) 1,373.50p -3.61%
Evraz (EVR) 592.00p -3.30%
Intermediate Capital Group (ICP) 2,126.00p -2.97%
Ocado Group (OCDO) 2,003.00p -2.86%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,692.00p -2.66%
London Stock Exchange Group (LSEG) 7,970.00p -2.42%
Avast (AVST) 489.80p -2.04%
Taylor Wimpey (TW.) 158.95p -2.03%
Entain (ENT) 1,745.50p -1.94%
Fresnillo (FRES) 771.60p -1.88%
FTSE 250 – Risers
Indivior (INDV) 154.60p 6.40%
Dixons Carphone (DC.) 130.20p 5.94%
Morrison (Wm) Supermarkets (MRW) 246.70p 4.53%
Trainline (TRN) 293.60p 3.02%
Ultra Electronics Holdings (ULE) 2,290.00p 2.69%
QinetiQ Group (QQ.) 343.60p 2.69%
Wood Group (John) (WG.) 219.70p 2.19%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 481.50p 2.12%
Liontrust Asset Management (LIO) 1,876.00p 1.62%
Watches of Switzerland Group (WOSG) 836.00p 1.58%
FTSE 250 – Fallers
Chrysalis Investments Limited NPV (CHRY) 247.00p -6.11%
TP Icap Group (TCAP) 195.40p -5.15%
Cineworld Group (CINE) 77.44p -4.68%
Crest Nicholson Holdings (CRST) 419.40p -4.38%
Volution Group (FAN) 418.50p -4.01%
Cairn Energy (CNE) 145.70p -3.89%
Capita (CPI) 37.31p -3.77%
Tyman (TYMN) 450.00p -3.64%
Hiscox Limited (DI) (HSX) 831.60p -3.55%
Essentra (ESNT) 309.00p -3.44%
