London equity markets had fallen into the red by midday on Tuesday as banks and travel stocks retreated, with traders returning to their desks after the Bank Holiday weekend.
The FTSE 100 was down 0.4% at 7,122.91.
Richard Hunter, head of markets at Interactive Investor, said: “Early exchanges after the market opening included some weakness in the banks and also airline and related stocks, given the ongoing uncertainties around a full resumption of international travel.
“Nonetheless UK markets also remain in positive territory in the year to date, albeit at more sedate levels of growth than their US counterparts, with the FTSE 100 ahead by 10.8% and the FTSE 250 by 17.4%.”
Investors were digesting the latest data out of China. The official manufacturing purchasing managers’ index edged down to 50.1 in August from 50.4 in July, coming in just a touch below consensus expectations of 50.2. Meanwhile, the official non-manufacturing PMI tumbled to 47.5 in August from 53.3 the month before, coming in well below consensus expectations for a reading of 52.0.
On home shores, figures from the Bank of England showed that households increased savings and borrowed no new money in July amid economic uncertainty and rising Covid-19 cases.
Net consumer credit was unchanged, down from £0.3bn of extra borrowing a month earlier and missing analysts’ consensus forecast of £0.4bn. Households’ total liquid assets, including bank deposits and savings, rose by £7.1bn. The BoE did not give reasons for the trends.
The figures cast doubt on hopes that households would splurge money saved during the crisis to support a sustained economic recovery. The data also showed the housing market slowing after a year-long boom supported by the Chancellor’s stamp duty holiday, which ends in September.
Meanwhile, mortgage approvals for house purchases fell to 75,200 – the lowest since July 2020. Sunak’s decision to cut stamp duty fuelled a boom in property sales and purchases supported by households looking for more space to work from home.
Approvals were well ahead of their longer-term average but Pantheon Macroeconomics economist Samuel Tombs said he expected mortgage activity to return to pre-crisis levels by the end of 2021.
“Demand indicators already are softening, now that potential buyers have little hope of completing a transaction before the threshold for Stamp Duty Land Tax returns to £125K at the end of September, from £250K at present,” he said.
In equity markets, travel stocks retreated after the EU recommended a pause on all non-essential travel from the US due to rising Covid cases. British Airways and Iberia parent IAG and budget airlines Wizz Air and easyJet were all weaker.
Banks also lost ground, with HSBC, NatWest, Barclays and Lloyds all lower. HSBC was in focus following a report it’s in advanced and exclusive talks with L&T Finance Holdings to buy its mutual fund arm.
Engine maker Rolls-Royce fell after its biggest shareholder, Causeway Capital Management, called on the company’s incoming chair to “refresh” the board as it emerges from a downturn. Jonathan Eng, portfolio manager at the California-based investment group, told the Financial Times that he would like Anita Frew, who takes over as chair in October, to consider whether it had the right expertise at the top.
Bunzl dropped even as it reported first-half adjusted profit up almost 15% as a recovery in its core business more than offset declining sales of Covid-19 related products.
Going the other way, Computacenter gained after saying it continues to expect annual adjusted profit to be ahead of market views.
Market Movers
FTSE 100 (UKX) 7,122.91 -0.35%
FTSE 250 (MCX) 24,124.65 0.27%
techMARK (TASX) 4,849.68 0.05%
FTSE 100 – Risers
Melrose Industries (MRO) 170.04p 12.28%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,570.00p 2.61%
Ferguson (FERG) 10,430.00p 2.25%
Weir Group (WEIR) 1,717.00p 1.99%
SSE (SSE) 1,647.50p 1.57%
Smiths Group (SMIN) 1,446.50p 1.47%
Royal Mail (RMG) 496.50p 1.31%
Croda International (CRDA) 9,166.00p 1.26%
Ashtead Group (AHT) 5,674.00p 1.25%
Auto Trader Group (AUTO) 631.80p 1.12%
FTSE 100 – Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 157.96p -3.22%
HSBC Holdings (HSBA) 384.90p -2.41%
Rolls-Royce Holdings (RR.) 114.10p -2.33%
Bunzl (BNZL) 2,616.00p -2.09%
Sainsbury (J) (SBRY) 304.60p -2.00%
NATWEST GROUP PLC ORD 100P (NWG) 214.50p -1.92%
Prudential (PRU) 1,500.00p -1.80%
ITV (ITV) 115.75p -1.74%
BP (BP.) 298.05p -1.47%
B&M European Value Retail S.A. (DI) (BME) 567.40p -1.29%
FTSE 250 – Risers
Trustpilot Group (TRST) 431.20p 4.73%
Chrysalis Investments Limited NPV (CHRY) 274.00p 4.60%
Computacenter (CCC) 2,990.00p 3.68%
Indivior (INDV) 197.70p 3.30%
XP Power Ltd. (DI) (XPP) 5,620.00p 2.93%
Capita (CPI) 49.35p 2.71%
RIT Capital Partners (RCP) 2,680.00p 2.68%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,570.00p 2.61%
Biffa (BIFF) 393.50p 2.48%
Inchcape (INCH) 911.00p 2.36%
FTSE 250 – Fallers
National Express Group (NEX) 252.80p -3.20%
Babcock International Group (BAB) 358.80p -2.95%
Wizz Air Holdings (WIZZ) 4,831.00p -2.77%
Lancashire Holdings Limited (LRE) 624.50p -2.27%
Hays (HAS) 158.10p -2.23%
Playtech (PTEC) 410.60p -2.19%
The Renewables Infrastructure Group Limited (TRIG) 125.60p -2.18%
Carnival (CCL) 1,550.20p -2.13%
WH Smith (SMWH) 1,631.50p -2.07%
easyJet (EZJ) 794.40p -1.83%
