London stocks were still treading water by midday on Tuesday amid ongoing concerns about inflation and economic growth.
The FTSE 100 was up just 0.1% at 7,612.92 but faring better than its European counterparts – the benchmark Stoxx Europe 600 was down 0.5% – thanks in part to a solid performance from heavily-weighted mining stocks.
Meanwhile, the pound was clawing back some losses, down 0.2% against the greenback at 1.2510.
Investors were still reacting to news that Prime Minister Boris Johnson scraped through a confidence vote on Monday evening, with a margin of 211 to 148.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The FTSE 100 has largely shrugged off the political drama of yesterday’s no confidence vote, with a dramatic reaction avoided. However, the situation has put a ceiling on progress, with no meaningful additions to the 75 point gains the FTSE began the week with.
“Political turmoil is always bound to leave a mark on UK investor confidence, but the full extent of any market moves will depend on how quickly the saga is truly put to bed. There’s still plenty of uncertainty looming about the stability of the current government, and until those jitters have gone, the market will struggle to find its place.”
Sentiment was fragile after the Reserve Bank of Australia delivered a bigger-than-expected interest rate hike. The Bank lifted rates by 50 basis points to 0.85% as it looks to curb inflation. Analysts had been expecting a 25 bps hike.
Neil Wilson, chief market analyst at Markets.com, said: “The move has just poured a bit of cold water on yesterday’s risk-on mood, which had already cooled somewhat following the rise in US bond yields last night as the 10yr Treasury climbed back above 3% to its highest level in a month.
“We know rates are rising near-term so the question is one of whether the stock market has adjusted to this yet. On that front, the real uncertainty lies in earnings and whether inflation has peaked – US CPI later this week is important on that front.”
On home shores, the latest data from the British Retail Consortium showed that retail sales fell in May as the cost-of-living crisis and soaring inflation squeezed consumers further.
A separate survey out earlier showed that UK business growth slowed sharply in May as surging inflation hit home. The S&P Global CIPS UK Services PMI Business Activity Index fell to 53.4 last month from 58.9 in April, the weakest headline reading since February 2021, when the country was in lockdown.
Once falls caused by Covid-19 lockdowns were stripped out, the month-on-month decline was the largest since the survey began in July 1996. May’s reading was, however, ahead of the flash estimate of 51.8.
In equity markets, JD Sports was under the cosh after the Competition and Markets Authority said that it had provisionally concluded that JD and rival retailer Elite Sports fixed the retail prices of a number of Rangers-branded replica kits and other clothing products from September 2018 until at least July 2019.
Retailers more generally were under pressure, with B&Q owner Kingfisher, online supermarket Ocado, Marks & Spencer and discount retailer B&M European Value Retail all weaker, most likely on the back of the BRC data.
National Express lost ground as the transport operator said revenue continues to track close to pre-pandemic levels but reiterated that in the short-term, the recovery in profitability will lag the revenue recovery.
On the upside, waste management specialist Biffa surged to the top of the FTSE 250 after saying it had given the green light to a proposed takeover approach worth £1.36bn. The company said it had received a series of unsolicited, indicative proposals from affiliates of Energy Capital Partners, the private equity firm, and following talks, a possible cash offer of 445p per share has been proposed.
Outside the FTSE 350, Ted Baker shares tumbled after the fashion retailer said its preferred bidder had pulled out of takeover talks. Ted Baker had not named the preferred bidder, but it was widely reported to be Authentic Brands, the owner of Juicy Couture and Reebok.
Market Movers
FTSE 100 (UKX) 7,612.92 0.06%
FTSE 250 (MCX) 20,412.32 -0.46%
techMARK (TASX) 4,391.01 -0.18%
FTSE 100 – Risers
Airtel Africa (AAF) 159.90p 2.11%
British American Tobacco (BATS) 3,601.50p 1.95%
Rio Tinto (RIO) 6,057.00p 1.70%
British Land Company (BLND) 537.80p 1.47%
Anglo American (AAL) 4,017.00p 1.27%
Melrose Industries (MRO) 139.15p 0.98%
AstraZeneca (AZN) 10,168.00p 0.95%
Severn Trent (SVT) 2,899.00p 0.94%
Imperial Brands (IMB) 1,820.50p 0.77%
GSK (GSK) 1,707.80p 0.76%
FTSE 100 – Fallers
JD Sports Fashion (JD.) 119.45p -3.08%
Scottish Mortgage Inv Trust (SMT) 774.80p -2.93%
Kingfisher (KGF) 261.30p -2.06%
Abrdn (ABDN) 192.90p -1.88%
Harbour Energy (HBR) 377.10p -1.87%
Intermediate Capital Group (ICP) 1,570.50p -1.78%
Rightmove (RMV) 583.40p -1.75%
Auto Trader Group (AUTO) 579.40p -1.73%
3i Group (III) 1,230.00p -1.60%
London Stock Exchange Group (LSEG) 7,214.00p -1.56%
FTSE 250 – Risers
Biffa (BIFF) 410.20p 26.22%
Mitie Group (MTO) 59.80p 2.75%
Capricorn Energy (CNE) 212.40p 2.41%
Ultra Electronics Holdings (ULE) 3,280.00p 2.12%
Henderson Smaller Companies Inv Trust (HSL) 937.00p 1.85%
Abrdn Private Equity Opportunities Trust (APEO) 480.00p 1.69%
Pennon Group (PNN) 1,043.00p 1.56%
Plus500 Ltd (DI) (PLUS) 1,610.00p 1.51%
Morgan Advanced Materials (MGAM) 324.50p 1.41%
Playtech (PTEC) 559.00p 1.36%
FTSE 250 – Fallers
Ferrexpo (FXPO) 181.10p -6.26%
National Express Group (NEX) 254.00p -6.13%
Bridgepoint Group (Reg S) (BPT) 321.20p -4.69%
Marks & Spencer Group (MKS) 144.85p -3.95%
XP Power Ltd. (DI) (XPP) 3,165.00p -3.51%
Kainos Group (KNOS) 1,222.00p -3.17%
IP Group (IPO) 80.30p -3.02%
Genus (GNS) 2,640.00p -3.01%
Greencore Group (CDI) (GNC) 111.40p -2.79%
Trustpilot Group (TRST) 93.70p -2.60%
