London stocks were firmly in the red by midday on Thursday, having taken their opening cue from a selloff on Wall Street on the back of hot inflation data, as weak UK GDP figures fuelled recession fears.
The FTSE 100 was down 2.3% at 7,213.37, while sterling was 0.3% weaker against the dollar at 1.2209 after figures from the Office for National Statistics showed the economy contracted in March amid rising prices, following no growth the month before.
GDP shrank by 0.1%, versus expectations for no change, leaving the economy just 1.2% above its pre-Covid level. The main contributor to the monthly decline was a 0.2% contraction in the services sector.
February’s GDP was revised down from an initial estimate of 0.1% growth.
During the first three months of the year, growth slowed to 0.8% from 1.3% in the previous quarter, versus expectations for 1% growth. This marked the lowest quarterly growth in a year.
Darren Morgan, ONS director of Economic Statistics, said: “The UK economy grew for the fourth consecutive quarter and is now clearly above pre-pandemic levels, although growth in the latest three months was the lowest for a year.
“This was driven by growth in a number of service sectors as the economy continued to recover from Covid-19 effects, including hospitality, transport, employment agencies and travel agencies. There was also strong growth in IT.
“There were, though, some downward effects from other services, including retailing, wholesaling and car sales and also health, due to continuing decreases in the Test and Trace service and vaccination programmes.
“Our latest monthly estimates show GDP fell a little in March, with drops in both services and in production. Construction, though, saw a strong month thanks partly to repair work after the February storms.”
Paul Dales, chief UK economist at Capital Economics, said: “The risk of recession has just risen, although strong price pressures will probably mean the Bank of England will raise interest rates further.”
In equity markets, miners were among the worst performers amid worries about a global slowdown, with Antofagasta, Glencore, Anglo American and Rio Tinto all sharply lower.
Tech-heavy Scottish Mortgage Investment Trust was also under pressure. Russ Mould, investment director at AJ Bell, said: “Investors feared portfolio company valuations would be worth less based on discounted cash flow models because of rising interest rates.
“Once seen as a superstar vehicle for the world’s next big things in the world of business, Scottish Mortgage has lost its shine big time. Its share price is down 43% year-to-date and has more than halved in value since last November’s peak.”
Hargreaves Lansdown lost ground after the investment platform reported a drop in assets under management and net new business for the four months to 30 April.
Food producer Cranswick crumbled as it emerged that a number of retailers including Aldi, Sainsbury’s and M&S had recalled their food-to-go products containing chicken due to concerns about salmonella contamination.
On the upside, retailer JD Sports gained as it said like-for-like sales were more than 5% higher year-on-year, driven by both the “strength and breadth” of its brand relationships and category offerings.
BT rallied as the telecoms and broadcasting group said it was moving its sports TV division into a 50-50 joint venture with Warner Bros Discovery and reported a small rise in adjusted annual core earnings after revenue fell 2%.
Engine maker Rolls-rose it said it continues to trade in line with expectations and that it expects low double-digit percentage underlying revenue growth in the civil aerospace business, and backed its 2022 guidance.
Coca-Cola HBC and RHI Magnesita were also trading higher after well-received updates.
Market Movers
FTSE 100 (UKX) 7,178.62 -2.30%
FTSE 250 (MCX) 19,286.20 -1.84%
techMARK (TASX) 4,173.19 -1.82%
FTSE 100 – Risers
JD Sports Fashion (JD.) 122.10p 2.69%
Coca-Cola HBC AG (CDI) (CCH) 1,639.50p 2.60%
BT Group (BT.A) 178.25p 1.02%
Unilever (ULVR) 3,719.00p 0.77%
Associated British Foods (ABF) 1,617.00p 0.56%
Next (NXT) 6,224.00p 0.16%
Vodafone Group (VOD) 119.05p 0.16%
SSE (SSE) 1,843.00p 0.11%
Compass Group (CPG) 1,695.50p 0.09%
Rolls-Royce Holdings (RR.) 80.45p -0.06%
FTSE 100 – Fallers
Fresnillo (FRES) 715.00p -7.53%
Hargreaves Lansdown (HL.) 832.80p -6.85%
Scottish Mortgage Inv Trust (SMT) 730.80p -6.40%
Ocado Group (OCDO) 715.40p -6.39%
Endeavour Mining (EDV) 1,818.00p -6.14%
Glencore (GLEN) 447.60p -5.97%
Antofagasta (ANTO) 1,326.50p -5.42%
Anglo American (AAL) 3,219.00p -5.25%
Rio Tinto (RIO) 5,100.00p -4.80%
SEGRO (SGRO) 1,061.00p -4.50%
FTSE 250 – Risers
RHI Magnesita N.V. (DI) (RHIM) 2,398.00p 6.96%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 324.00p 1.57%
Capital & Counties Properties (CAPC) 159.50p 0.82%
CLS Holdings (CLI) 211.50p 0.71%
Grainger (GRI) 283.00p 0.71%
Convatec Group (CTEC) 206.20p 0.59%
Mediclinic International (MDC) 351.20p 0.52%
PZ Cussons (PZC) 204.50p 0.49%
Derwent London (DLN) 2,872.00p 0.49%
TUI AG Reg Shs (DI) (TUI) 230.40p 0.44%
FTSE 250 – Fallers
Chrysalis Investments Limited NPV (CHRY) 122.20p -8.81%
Auction Technology Group (ATG) 888.00p -7.60%
Hochschild Mining (HOC) 102.10p -6.67%
Ferrexpo (FXPO) 135.00p -6.38%
Bridgepoint Group (Reg S) (BPT) 249.40p -5.96%
Baillie Gifford US Growth Trust (USA) 153.80p -5.88%
Renishaw (RSW) 3,794.00p -5.72%
Molten Ventures (GROW) 548.00p -5.52%
Lancashire Holdings Limited (LRE) 372.20p -5.34%
Allianz Technology Trust (ATT) 213.00p -5.33%
