London close: Stocks finish off lows, but analysts cautious

A spate of weaker-than-expected Chinese data and continuing concerns around the situation in Turkey weighed on stocks on Tuesday, although the tone in financial markets was calmer as the Turkish lira staged a bounce.

The FTSE 100 dropped 0.40% or 30.81 points to 7,611.64, even as the pound gave back another 0.41% against the Greenback to trade at 1.27146, although it was up by 0.15% versus the euro to 1.1212, having briefly spiked higher after data showed that UK unemployment fell to a new 43-year low in the three months to June, but wage growth stalled.

Acting as a backdrop, readings on Chinese industrial production, fixed asset investment and retail sales for July all fell short of forecasts, prompting analysts to caution that economic growth was unlikely to improve until the middle of 2019.

Yet the mood in markets was a lot calmer as, at least for the time being, Turkish authorities succeeded in stabilising the lira, with the US dollar falling back by 5.86% to 6.4807 lira.

Nevertheless, time was not on the side of Turkish officials, analysts at Oxford Economics said.

"The authorities need to act decisively, but, history suggests that they will instead procrastinate, meaning pressure on the TRY will persist. Turkey is on the verge of getting caught in a self-inflicted vicious circle that leads to a full-blown balance of payments crisis," they told clients in a research note.

Back in the UK, figures from the Office for National Statistics revealed that UK wage growth stalled even as unemployment fell to 4.0% from 4.2% in May. Average weekly pay in the three months from April to June was up 2.4% compared to the three-month period to the end of March, which was down from the 2.5% rate reported a month ago, which economists had expected to be repeated.

Furthermore, economist Sam Tombs at Pantheon Macroeconomics observed that employment growth was losing momentum, rising only 0.1% in the second quarter after the 0.6% growth in the first.

"Employment, therefore, likely will only keep up with the growing size of the workforce and the unemployment rate shouldn't fall materially further before the end of this year," Tombs said.

In corporate news, Esure extended Monday's gains as it agreed to be bought by private equity firm Bain Capital for 280p a share in cash. The insurer also posted a drop in first-half pre-tax profit, partly on the back of adverse weather-related claims costs.

Debenhams surged as Sports Direct boss Mike Ashley said he was committed to keeping open most of the 59 House of Fraser stores he bought last week. The sports retailer has a near-30% stake in Debenhams.

Neil Wilson, chief market analyst at Markets.com, said: "The indications are that the long-called-for tie-up between Debenhams and HoF is now very much on the cards. As noted last week, a move to effectively consolidate the two troubled department store chains into a single offering looks to be the only viable solution to their problems; combining the operations to reduce overheads and stop competing against each other will prove beneficial."

Plastic piping and ventilation systems manufacturer Polypipe advanced on the back of a resilient first-half performance, while builders merchant Grafton Group edged up after saying it was raising €160m (£144m) through a private placing in the US, with the proceeds set to be used for debt refinancing and general corporate purposes.

Royal Mail fell after Ofcom fined the company £50m for a "serious breach" of competition law, with the regulator finding the postal group had "abused its dominant position" in the letter delivery market.

Antofagasta was under the cosh as interim profits were hit by lower sales tonnages and copper grades alongside higher central costs, although the miner said it expected a better second half.

On the broker note front, Citi replaced Rio Tinto with BHP Billiton on its ‘focus’ list, while Spectris was lifted to ‘add’ at Peel Hunt and Elementis was upgraded to ‘buy’ at Berenberg.

Card Factory was a big faller after it was cut to ‘sell’ at Berenberg.

Market Movers

FTSE 100 (UKX) 7,611.64 -0.40%
FTSE 250 (MCX) 20,532.96 -0.20%
techMARK (TASX) 3,542.79 -0.54%

FTSE 100 - Risers

United Utilities Group (UU.) 750.80p 1.51%
Burberry Group (BRBY) 2,283.00p 1.47%
Severn Trent (SVT) 1,997.50p 1.40%
Ferguson (FERG) 6,257.00p 1.36%
Pearson (PSON) 928.80p 1.33%
Melrose Industries (MRO) 219.20p 1.11%
International Consolidated Airlines Group SA (CDI) (IAG) 684.00p 1.06%
Sage Group (SGE) 670.40p 0.93%
GVC Holdings (GVC) 1,115.00p 0.90%
Reckitt Benckiser Group (RB.) 6,842.00p 0.81%

FTSE 100 - Fallers

Antofagasta (ANTO) 891.40p -6.44%
TUI AG Reg Shs (DI) (TUI) 1,481.50p -2.95%
Anglo American (AAL) 1,646.60p -2.01%
Micro Focus International (MCRO) 1,220.00p -1.85%
Prudential (PRU) 1,751.50p -1.82%
St James's Place (STJ) 1,136.50p -1.73%
BT Group (BT.A) 223.35p -1.67%
Royal Mail (RMG) 454.90p -1.60%
Royal Bank of Scotland Group (RBS) 242.20p -1.46%
Legal & General Group (LGEN) 261.50p -1.40%

FTSE 250 - Risers

Hill & Smith Holdings (HILS) 1,099.00p 6.29%
Polypipe Group (PLP) 375.00p 5.63%
esure Group (ESUR) 277.40p 3.82%
CLS Holdings (CLI) 235.50p 3.06%
IP Group (IPO) 124.00p 2.99%
TalkTalk Telecom Group (TALK) 120.20p 2.91%
Fisher (James) & Sons (FSJ) 1,812.00p 2.84%
Spire Healthcare Group (SPI) 164.80p 2.68%
Elementis (ELM) 262.20p 2.50%
RHI Magnesita N.V. (DI) (RHIM) 5,100.00p 2.00%

FTSE 250 - Fallers

Cairn Energy (CNE) 232.80p -6.58%
Card Factory (CARD) 178.60p -5.00%
TBC Bank Group (TBCG) 1,538.00p -4.11%
FDM Group (Holdings) (FDM) 947.00p -3.76%
Premier Oil (PMO) 118.20p -3.19%
Domino's Pizza Group (DOM) 281.50p -2.93%
Capita (CPI) 135.85p -2.58%
AA (AA.) 115.05p -2.42%
Primary Health Properties (PHP) 113.20p -2.41%
Kaz Minerals (KAZ) 612.60p -2.39%