London midday: Stocks pop higher as sterling slumps on services data

by | Sep 5, 2023

(Sharecast News) – London stocks had popped into the black by midday on Tuesday, as sterling fell on the back of uninspiring services data.
The FTSE 100 was up 0.1% at 7,460.77, reversing earlier losses.

At the same time, the pound was down 0.5% against the dollar at 1.2560 after a survey showed that business activity in the UK services sector fell in August for the first time since January amid higher interest rates.

A weaker pound tends to boost the top-flight index as around 70% of its constituents derive their earnings overseas.

The S&P Global/CIPS services purchasing managers’ index declined to 49.5 from 51.5 in July, coming in below the 50.0 mark that separates contraction from expansion but ahead of consensus and the first estimate of 48.7.

Service providers highlighted caution among clients and fewer new business opportunities, linked to rising interest rates, squeezed disposable incomes and concerns about the economic outlook.

The composite PMI – which includes manufacturing – came in at 48.6 last month, down from 50.8 in July, below 50.0 for the first time since January.

Tim Moore, economics director at S&P Global Market Intelligence, said: “Service providers saw customer spending reverse course during August as higher borrowing costs, subdued business confidence, and stretched household finances all acted to curtail sales opportunities.

“After a modest recovery over the past six months, service sector businesses are now clearly feeling the impact of rising interest rates on client demand. Worries about the broader business climate also dampened spending in August, with firms suggesting that faltering UK economic growth and sticky inflation were weighing on the outlook.

“Adding to signs of reduced pressure on business capacity, the latest survey indicated that backlogs of work decreased at the fastest pace for over three years. Service providers appear to have gently put the brake on staff hiring, with job creation easing to its lowest since March.”

Investors were also digesting the latest data out of China, where the Caixin services PMI for August fell to 51.8 from 54.1 in July, below consensus expectations of 53.0.

The latest retail sales figures from the British Retail Consortium were also in focus. They showed that sales growth jumped in August, as an improvement in consumer confidence drove spending on health and beauty products, and food and drink.

Total retail sales increased at an annual rate of 4.1% last month, accelerating from the 1.5% growth registered in July after disappointing weather dampened footfall for many retailers.

The three-month moving average for annual sales growth increased to 3.6% in August from 3.5% in July, BRC said.

The three-month average growth rate of food sales eased from 8.4% to 8.2%, but this was offset by an improvement in the decline in non-food, from -0.5% to -0.2%.

BRC chief executive Helen Dickinson said: “Sale of non-food products had their best month since February, particularly for health and beauty products as retailers continued to invest in new, exciting brands, and customers splurged on self-care.”

In equity markets, B&M European Value Retail fell after a downgrade to ‘underweight’ from ‘overweight’ at JPMorgan Cazenove. Tesco was also weaker after a downgrade to ‘neutral’ from ‘overweight’ by JPM.

B&M was also in focus after agreeing to buy up to 51 Wilko stores from administrators for £13m.

Equipment rental firm Ashtead lost ground as it reported a record performance in its fiscal first quarter, but cut its forecast for UK growth due to a “softening” market.

Outside the FTSE 350, oil producer EnQuest tanked as it posted a first-half loss, pointing to the energy windfall tax.

On the upside, Lancashire Holdings jumped after an upgrade to ‘equalweight’ from ‘underweight’ at Morgan Stanley, while Relx gained after an upgrade to ‘buy’ at Investec.

Market Movers

FTSE 100 (UKX) 7,460.77 0.11%
FTSE 250 (MCX) 18,497.97 -0.14%
techMARK (TASX) 4,267.35 -0.18%

FTSE 100 – Risers

Centrica (CNA) 155.15p 1.41%
HSBC Holdings (HSBA) 592.00p 1.06%
Whitbread (WTB) 3,521.00p 1.03%
Halma (HLMA) 2,162.00p 0.89%
InterContinental Hotels Group (IHG) 6,034.00p 0.87%
Vodafone Group (VOD) 73.05p 0.83%
Relx plc (REL) 2,605.00p 0.81%
Rio Tinto (RIO) 5,040.00p 0.80%
AstraZeneca (AZN) 10,772.00p 0.77%
Admiral Group (ADM) 2,387.00p 0.67%

FTSE 100 – Fallers

Entain (ENT) 1,159.50p -2.23%
B&M European Value Retail S.A. (DI) (BME) 554.80p -2.15%
Tesco (TSCO) 258.20p -2.12%
Endeavour Mining (EDV) 1,567.00p -1.63%
Croda International (CRDA) 5,386.00p -1.50%
Flutter Entertainment (CDI) (FLTR) 14,130.00p -1.50%
Ashtead Group (AHT) 5,404.00p -1.17%
Spirax-Sarco Engineering (SPX) 9,900.00p -1.15%
Smith & Nephew (SN.) 1,043.00p -1.14%
Melrose Industries (MRO) 507.60p -1.13%

FTSE 250 – Risers

Mobico Group (MCG) 87.50p 2.94%
Lancashire Holdings Limited (LRE) 586.50p 2.71%
Trainline (TRN) 241.80p 2.28%
Caledonia Investments (CLDN) 3,460.00p 2.22%
Bakkavor Group (BAKK) 100.00p 2.04%
Wood Group (John) (WG.) 159.30p 1.79%
Hipgnosis Songs Fund Limited NPV (SONG) 80.00p 1.78%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 455.00p 1.56%
PureTech Health (PRTC) 204.00p 1.49%
Digital 9 Infrastructure NPV (DGI9) 61.40p 1.49%

FTSE 250 – Fallers

Ferrexpo (FXPO) 80.70p -3.41%
Abrdn Private Equity Opportunities Trust (APEO) 425.00p -2.19%
Synthomer (SYNT) 61.00p -2.09%
CMC Markets (CMCX) 104.20p -2.07%
NCC Group (NCC) 98.00p -2.00%
4Imprint Group (FOUR) 4,950.00p -1.98%
Warehouse Reit (WHR) 82.40p -1.79%
GCP Infrastructure Investments Ltd (GCP) 74.20p -1.72%
Hammerson (HMSO) 24.08p -1.71%
Wetherspoon (J.D.) (JDW) 690.50p -1.57%

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