London close: Stocks finish weaker as UK economy contracts

London stocks closed in the red on Friday, as investors digested the latest UK GDP data, with US President-elect Joe Biden’s Covid relief package failing to lift markets amid growing worries about the pandemic and tightening restrictions.

The FTSE 100 ended the session down 0.97% at 6,735.71, and the FTSE 250 was 0.77% weaker at 20,615.59.

Sterling was also in negative territory, last falling 0.64% against the dollar to $1.3601, and sliding 0.16% on the euro €1.1244.

“The long-awaited announcement was the highlight of the week,” quipped CMC Markets analyst David Madden on Biden’s stimulus package, though he added that sentiment in stocks had slipped since it was delivered, as traders were content to book profit from recent gains.

“Last week, the FTSE 100 and the CAC 40 set multi-month highs, while the DAX 30 notched up a record high.

“Much of the gains that they achieved recently were in anticipation of Biden’s stimulus announcement - lofty equity valuations combined with concerns that countries are going to extend their lockdowns have encouraged traders to exit the market.

“Pfizer said the rolling out of its vaccine in Europe will be slowed in the near-term as the pharma giant upgrades its production facility - that news is playing into the bearish move too.”

Data released earlier by the Office for National Statistics showed the economy shrank 2.6% in November but beat expectations as the government imposed a second Covid-19 lockdown on England.

The drop in output ended six consecutive months of growth as all four nations in the UK put restrictions in place in an effort to stem a resurgence of coronavirus infections.

Britain entered a stricter shutdown in early January that could last for months.

Output in November dropped back to 8.5% less than in February compared with a 61% shortfall in October.

The economy was 8.9% smaller than a year earlier compared with an annual decline of 6.8% the month before.

That result showed the economy holding up better than the 4.6% average drop forecast by analysts as businesses adapted to restrictions.

The services sector was most affected, dropping 3.4%, with hairdressers and pubs the hardest hit.

Production edged down 0.1% with factories open and often busy ahead of the Brexit trade deadline, while construction expanded 1.9%.

As far as Biden’s $1.9trn Covid relief package was concerned, IG’s Joshua Mahony said it appeared to be a case of ‘buy-the-rumour-sell-the-fact’, as investors largely shrugged off the package, which had been months in the making.

"While bulls have been crying out for a fresh cash injection to stave off further economic suffering, the minimal market reaction highlights the fact that markets have largely factored in such a package given the recent Democratic success," he said.

In equity markets, DS Smith was in the red by 4.69% after Merpas sold shares in the packaging company in a placing.

Oilfield services provider Petrofac slid 26.58% after the Serious Fraud Office said a former employee of one of its subsidiaries had admitted additional charges under the UK Bribery Act.

No charges were brought against any group company or any other officers or employees, Petrofac said.

Defence company Babcock lost 16.39% after it said profits had fallen by more than a third in the nine months to date as the coronavirus pandemic hit its civil aviation business.

Shares of food packing company Hilton Food tumbled 14.09% after an undisclosed institutional seller placed a 9.9% stake.

Wood Group was knocked 3.56% lower by a downgrade to ‘equal weight’ at Barclays, while Vesuvius lost 4.32% and Bodycote was 5.01% weaker after downgrades to ‘sector perform’ at RBC Capital Markets.

On the upside, Aveva rallied 6.97% as it said it was confident in its outlook for the current year after a "strong" third quarter improved revenue growth to about 1.5% in the nine months to the end of December.

Defence and aerospace engineer Meggitt rose 0.56% after it said it expects full-year results to be in line with expectations but cautioned that the expected recovery in air travel from the pandemic would take longer than expected.

Opioid addiction treatment maker Indivior surged 9.81% after it upped its full-year revenue guidance and said adjusted pre-tax income is set to beat its previous expectations, thanks in part to better-than-expected revenues from its Sublocade treatment.

Market Movers

FTSE 100 (UKX) 6,735.71 -0.97%
FTSE 250 (MCX) 20,615.59 -0.77%
techMARK (TASX) 4,149.57 0.18%

FTSE 100 - Risers

Aveva Group (AVV) 3,809.00p 7.08%
GlaxoSmithKline (GSK) 1,413.60p 1.45%
Pennon Group (PNN) 964.80p 1.30%
Unilever (ULVR) 4,394.00p 0.92%
Avast (AVST) 534.00p 0.75%
Persimmon (PSN) 2,688.00p 0.67%
Next (NXT) 7,998.00p 0.48%
AstraZeneca (AZN) 7,592.00p 0.44%
Flutter Entertainment (FLTR) 15,025.00p 0.43%
National Grid (NG.) 875.00p 0.30%

FTSE 100 - Fallers

Anglo American (AAL) 2,663.50p -5.31%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,872.00p -4.93%
Smith (DS) (SMDS) 386.50p -4.69%
Antofagasta (ANTO) 1,510.50p -3.91%
Kingfisher (KGF) 269.40p -3.65%
BHP Group (BHP) 2,135.00p -3.31%
Smurfit Kappa Group (SKG) 3,582.00p -3.24%
Mondi (MNDI) 1,803.00p -3.22%
Rio Tinto (RIO) 5,946.00p -3.03%
Fresnillo (FRES) 1,085.50p -2.90%

FTSE 250 - Risers

Indivior (INDV) 115.30p 9.81%
TUI AG Reg Shs (DI) (TUI) 403.20p 5.14%
Watches of Switzerland Group (WOSG) 630.00p 3.78%
Hiscox Limited (DI) (HSX) 998.00p 3.25%
CMC Markets (CMCX) 429.50p 3.12%
SSP Group (SSPG) 341.80p 2.90%
Savills (SVS) 1,041.00p 2.56%
Diploma (DPLM) 2,124.00p 2.51%
Royal Mail (RMG) 386.50p 2.17%
BlackRock Smaller Companies Trust (BRSC) 1,686.00p 2.06%

FTSE 250 - Fallers

Petrofac Ltd. (PFC) 120.75p -27.52%
Babcock International Group (BAB) 220.20p -16.43%
Hilton Food Group (HFG) 1,000.00p -14.09%
Synthomer (SYNT) 421.00p -5.56%
Games Workshop Group (GAW) 10,710.00p -5.22%
Bodycote (BOY) 729.50p -5.01%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,872.00p -4.93%
Aggreko (AGK) 632.50p -4.17%
Hochschild Mining (HOC) 193.30p -4.12%
Vesuvius (VSVS) 511.00p -3.95%