London stocks had fallen further into the red by midday on Thursday following the release of gloomy manufacturing data, as recession fears dented sentiment.
The FTSE 100 was down 1.5% at 7,177.17, while sterling was 0.5% weaker versus the dollar at 1.1562.
Russ Mould, investment director at AJ Bell, said: “The start of September has not brought about any change to the current gloomy mood pervading markets.
“Further weakness in the US and Asia, with the rally of early August an increasingly distant memory, set the stage for selling in Europe. Reports of the US banning the sale of micro-chips by Nvidia to China and Russia helps move geo-political risks up another notch on the dial.
“Commodities also fell on signs China is yet to shake off its problems with Covid, providing yet another section of a wall of worry that markets now have to climb.
“Not even further weakness in the pound, as the Resolution Foundation warns of a ‘frankly terrifying’ outlook for living standards, can spare the FTSE 100 from the pain.
“For now, the swift reversal in fortunes for stocks will add grist to the mill for those arguing their recovery a few weeks ago represented nothing more than a ‘bear market rally’.”
A downbeat survey on manufacturing did little to lift the mood. The S&P Global/CIPS manufacturing purchasing managers’ index fell to a 27-month low of 47.3 from 52.1 in July, although it was above the flash estimate of 46.0. This marked the first reading below the 50 mark that separates contraction from expansion since May 2020, when the country was in its first Covid lockdown.
The survey showed that output and new orders contracted at the fastest rates since that first lockdown, as inflows from domestic and export markets slumped.
Rob Dobson, director at S&P Global Market Intelligence, said: “There were reports of clients postponing, rescheduling or cancelling agreements due to increased economic uncertainties, recession warnings, rising prices and component shortages, while port congestion and Brexit complications constrained export opportunities.
“The deepening downturn also impacted trends in employment, purchasing and business optimism. The rate of job creation came to a near-standstill, while input buying was cut back sharply – hitting demand at suppliers. Business optimism sank to a 28-month low as companies noted that the horizon was darkening amid concerns about recession and the impact of the cost-of-living crisis.”
Earlier, a survey from Nationwide showed that annual house price growth eased less than expected in August but there are signs of a further slowdown to come.
Annual house price growth slowed to 10% from 11% in July, but was ahead of expectations for growth of 8.9%. On the month, meanwhile, house prices rose 0.8% in August following a 0.2% increase the month before, and versus expectations for a 0.1% uptick.
Nationwide chief economist Robert Gardner said: “There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels. However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that price growth has remained firm.
“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year.”
In equity markets, Glencore, Admiral, Antofagasta, Endeavour, Redde Northgate, PageGroup and Centamin all fell as they traded without entitlement to the dividend.
Consumer goods giant Reckitt Benckiser slumped as it said chief executive officer Laxman Narasimhan will step down at the end of September.
Rio Tinto was in the red after agreeing to buy the remaining shares in Canada’s Turquoise Hill Resources it does not already own for $3.3bn.
Advertising giant WPP lost ground as it announced the acquisition of European ecommerce consultancy Newcraft for an undisclosed sum.
Pearson bucked the trend after JPMorgan Cazenove reinstated its ‘overweight’ rating on shares of the education publisher, highlighting its defensive qualities.
IT services provider Kainos was also trading higher after it said full-year results were expected to meet current market forecasts for revenues of £335.7m to £373.4m and adjusted pre-tax profits of £62.7m to £66.5m.
Market Movers
FTSE 100 (UKX) 7,177.17 -1.47%
FTSE 250 (MCX) 18,726.41 -1.77%
techMARK (TASX) 4,252.03 -1.40%
FTSE 100 – Risers
Centrica (CNA) 77.52p 2.35%
SSE (SSE) 1,673.00p 1.24%
Pearson (PSON) 873.40p 1.23%
JD Sports Fashion (JD.) 113.95p 0.89%
Harbour Energy (HBR) 479.60p 0.55%
AstraZeneca (AZN) 10,698.00p 0.51%
Aveva Group (AVV) 2,813.00p 0.46%
Avast (AVST) 709.80p 0.40%
Imperial Brands (IMB) 1,901.00p 0.24%
British American Tobacco (BATS) 3,452.00p 0.01%
FTSE 100 – Fallers
Glencore (GLEN) 439.20p -7.20%
Admiral Group (ADM) 1,989.00p -6.27%
Entain (ENT) 1,201.00p -5.66%
Intermediate Capital Group (ICP) 1,292.00p -5.49%
Rolls-Royce Holdings (RR.) 72.86p -5.38%
British Land Company (BLND) 409.60p -4.92%
3i Group (III) 1,157.00p -4.81%
Endeavour Mining (EDV) 1,606.00p -4.58%
Ocado Group (OCDO) 693.80p -4.44%
Reckitt Benckiser Group (RKT) 6,370.00p -4.18%
FTSE 250 – Risers
Chrysalis Investments Limited NPV (CHRY) 74.20p 3.20%
Capricorn Energy (CNE) 237.40p 2.24%
Kainos Group (KNOS) 1,389.00p 1.98%
Drax Group (DRX) 648.00p 1.89%
Fidelity Emerging Markets Limited Ptg NPV (FEML) 629.70p 1.40%
FirstGroup (FGP) 116.70p 1.39%
Hipgnosis Songs Fund Limited NPV (SONG) 114.20p 1.06%
Darktrace (DARK) 515.40p 0.82%
GCP Infrastructure Investments Ltd (GCP) 109.00p 0.74%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 510.00p 0.59%
FTSE 250 – Fallers
Pagegroup (PAGE) 396.80p -8.61%
Hammerson (HMSO) 20.19p -7.51%
Redde Northgate (REDD) 318.00p -7.15%
Royal Mail (RMG) 257.80p -6.42%
Hochschild Mining (HOC) 61.15p -5.92%
Liontrust Asset Management (LIO) 870.00p -5.02%
Workspace Group (WKP) 496.60p -4.77%
Clarkson (CKN) 2,875.00p -4.64%
TUI AG Reg Shs (DI) (TUI) 126.30p -4.64%
LondonMetric Property (LMP) 207.20p -4.60%
