London stocks were firmly in the red by midday on Wednesday as inflation concerns grew amid surging oil and gas prices, and as investors mulled a disappointing reading on the UK construction sector.
The FTSE 100 was down 1.7% at 6,957.01, extending earlier losses.
Russ Mould, investment director at AJ Bell, said: “A continuing surge in energy prices means the sceptre of inflation is looming large over the markets again with the FTSE 100 down more than 1% in early trading.
“Oil prices are camped above $80 per barrel after producers’ cartel OPEC failed to increase output and natural gas continues to touch record highs. The concern will be that rising prices will prove much stickier than hoped.
“This is undermining the markets’ efforts to pick themselves off the canvas after a bruising autumn so far. The next big announcement on the radar is the US jobs report on Friday – a weak number could prompt concern that we are heading for the dreaded stagflation scenario.”
Investors were eyeing the release of the latest US ADP employment report at 1315 BST.
On home shores, meanwhile, a survey out earlier showed the construction sector’s recovery stalled last month as higher prices, staff shortages and supply chain disruptions hit home.
The IHS Markit CIPS Construction PMI total activity index came in a 52.6 in September, down on August’s 55.2 and a further decline on June’s 24-year high of 66.3.
It was also below consensus, with most analysts expecting 54.0, and the lowest reading since January.
All three categories reported a loss of momentum. The biggest slowdown was seen in civil engineering, which fell to 51.0 from 54.8 a month previously. Housebuilding was 52.8, down on August’s 55.0 and the weakest expansion since June 2020. Commercial was the best performing segment, at 53.6, though that was still down August’s 56.0.
Respondents attributed the slowdown to supply chain issues, a “severe” lack of materials, ongoing staff shortages and softer demand following the summer peak.
Tim Moore, director at IHS Markit, said: “The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards.
“As a result, the latest survey data pointed to the worst month for order books since January’s lockdown.”
In equity markets, Imperial Brands slumped despite saying it was track to meet full-year expectations as the business continues to perform well.
IP Group also slid after it said chief executive Alan Aubrey and chief investment officer Mike Townend are retiring and stepping down from the board with immediate effect following the successful flotation of its largest holding, Oxford Nanopore Technologies.
Homeserve was knocked lower by a downgrade to ‘underperform’ from ‘outperform’ at Exane.
Online greeting cards retailer Moonpig was under the cosh after Davy initiated coverage of the shares at ‘neutral” and said the valuation feels full despite a “rather anaemic” equity performance since it went public in February.
On the upside, supermarket chain Tesco rallied as it lifted full-year earnings guidance after strong first-half sales helped interim profits to more than double against a backdrop of labour shortages and cost pressures. The company also said it was starting an ongoing share buyback with the first tranche of £500m to be bought within a year.
Recruiter PageGroup was a high riser after it lifted its guidance for full-year operating profit to around £155m from between £125m and £135m, as it reported a jump in third-quarter gross profit. Peer Hays was also in the black.
HSBC was lifted by an upgrade to ‘buy’ at UBS.
Market Movers
FTSE 100 (UKX) 6,957.01 -1.70%
FTSE 250 (MCX) 22,255.72 -2.09%
techMARK (TASX) 4,476.15 -2.05%
FTSE 100 – Risers
Tesco (TSCO) 264.90p 4.70%
HSBC Holdings (HSBA) 405.90p 3.28%
Pearson (PSON) 738.20p 2.50%
Polymetal International (POLY) 1,260.00p 1.57%
Fresnillo (FRES) 787.20p 1.18%
Standard Chartered (STAN) 443.90p 0.48%
Avast (AVST) 563.00p 0.18%
Morrison (Wm) Supermarkets (MRW) 285.60p 0.00%
NATWEST GROUP PLC ORD 100P (NWG) 229.20p -0.26%
Sainsbury (J) (SBRY) 298.60p -0.27%
FTSE 100 – Fallers
Melrose Industries (MRO) 160.90p -4.82%
JD Sports Fashion (JD.) 1,020.50p -4.54%
Whitbread (WTB) 3,219.00p -4.20%
B&M European Value Retail S.A. (DI) (BME) 555.60p -4.11%
Next (NXT) 7,724.00p -3.95%
Compass Group (CPG) 1,471.00p -3.86%
Informa (INF) 560.80p -3.77%
Taylor Wimpey (TW.) 147.35p -3.76%
Imperial Brands (IMB) 1,496.50p -3.67%
InterContinental Hotels Group (IHG) 4,702.00p -3.67%
FTSE 250 – Risers
Pagegroup (PAGE) 654.00p 6.78%
Hays (HAS) 158.30p 1.74%
Endeavour Mining (EDV) 1,650.00p 1.23%
Spire Healthcare Group (SPI) 215.00p 0.47%
GCP Infrastructure Investments Ltd (GCP) 102.40p 0.39%
Diversified Energy Company (DEC) 121.00p 0.33%
Bytes Technology Group (BYIT) 502.50p 0.30%
Vietnam Enterprise Investments (DI) (VEIL) 710.00p 0.28%
Ninety One (N91) 248.40p 0.24%
GCP Student Living (DIGS) 212.50p 0.24%
FTSE 250 – Fallers
IP Group (IPO) 126.40p -7.06%
Homeserve (HSV) 800.00p -6.76%
Trustpilot Group (TRST) 356.40p -6.55%
Cineworld Group (CINE) 71.22p -5.94%
Moonpig Group (MOON) 281.60p -5.63%
Draper Esprit (GROW) 946.00p -5.40%
Trainline (TRN) 318.20p -5.30%
Elementis (ELM) 131.80p -5.25%
Wetherspoon (J.D.) (JDW) 979.00p -5.14%
Network International Holdings (NETW) 325.10p -5.11%
