London close: Mining, gambling and tobacco stocks drag Footsie down 0.9%
UK equities dropped on Monday owing to heavy falls in the mining, gambling and tobacco sectors weighing on markets, as investors scaled back their appetite for risk in the facing of surging bond yields and a higher interest-rate outlook.
London's FTSE 100 ended the session down 0.9% at 7,618, with just 17 of the 100 blue chip stocks finishing in positive territory.
“The new week has picked up where the last one left off. Stocks have dropped further in trading today, as the Fed’s ‘higher for longer’ rhetoric continues to prompt a flight from risk," said Chris Beauchamp, chief market analyst at IG.
Wall Street markets opened the week in subdued fashion, with the S&P 500 only edging higher after hitting a three-month low on Friday following dovish comments from Federal Reserve chair Jerome Powell, who indicated that rates are likely to stay elevated for at least the whole of 2024, with another hike possible this year.
Bond yields have risen strongly over recent sessions, and that momentum has continued into the new week, with the 10-year Treasury yield up 8.2 basis points at 4.522% on Monday as it continues to hit levels not seen since 2006.
"A fresh climb in yields only adds to the stock market’s woes, as investors come to realise that when Powell says ‘higher for longer’, he really means it," Beauchamp said.
On the decline: Entain, Burberry tobacco and mining stocks
Entain dropped over 13% after the Ladbrokes owner said its third-quarter performance was weaker than forecast due to adverse sporting results, regulatory headwinds and a slower-than-expected performance in Australia and Italy. As a result, full-year online net gaming revenue would be see a "low single digit percent" decline, compared with earlier guidance of "low to mid single digit" growth.
Sector peers Flutter Entertainment, 888 Holdings and Playtech all followed suit with share prices falling sharply.
Luxury group Burberry was also out of favour, down 5% on negative readacross from a broker downgrade at Gucci parent group Kering. Bank of America analysts cut the stock to 'underperform', saying they are turning more cautious on "companies with higher exposure to a younger, less affluent customer and in the midst of a brand turnaround", citing sector peers Burberry, Salvatore Ferragamo and Tod's.
Also sharply lower were tobacco rivals Imperial (-6%) and British American Tobacco (-3%) on reports that the UK government is looking at stricter laws around the legal smoking age. According to sources cited by The Guardian on Friday, Whitehall is considering measures similar to New Zealand where there is an annually rising legal age limit which effectively bans people buying tobacco who were born after January 2009.
Mining stocks were down, with Rio Tinto, Antofagasta, Fresnillo and Anglo American registering moderate losses, on the news that struggling Chinese developer China Evergrande called off a meeting with creditors and scrapped a debt restructuring plan. "Anything bad in China typically has a negative knock-on effect to UK-listed diversified mining stocks," said AJ Bell investment director Russ Mould. "Investors are clearly worried that commodity demand will weaken if China’s economy continues to falter.”
Building materials group CRH was the standout performer of the day, jumping 5%% after kicking off another $1bn share buyback programme, taking the total amount of buybacks since May 2018 to $6bn.
AstraZeneca was up 1% after analyst Mark Purcell at Morgan Stanley said EU biopharma plays should "offer a safe haven from weakening growth/higher real yields". Purcell said: "Whilst we continue to favour growth/innovation narratives in biopharma over the long term, we expect investors to reward earnings upgrade stories – Novo Nordisk, Novartis, AstraZeneca – in the near term."
Also outperforming the FTSE 100 was GSK after the approval of its Arexvy vaccine by Japan's Ministry of Health, Labour and Welfare. The vaccine, for the prevention of RSV disease in adults aged 60 and above, marks the first RSV vaccine for this age group in Japan.
FTSE 100 - Risers
CRH (CDI) (CRH) 4,556.00p 4.95%
IMI (IMI) 1,494.00p 1.63%
Barratt Developments (BDEV) 473.30p 1.22%
Smurfit Kappa Group (CDI) (SKG) 2,752.00p 1.18%
AstraZeneca (AZN) 11,144.00p 0.89%
Pershing Square Holdings Ltd NPV (PSH) 3,026.00p 0.87%
B&M European Value Retail S.A. (DI) (BME) 577.00p 0.63%
Melrose Industries (MRO) 470.70p 0.58%
M&G (MNG) 203.50p 0.35%
GSK (GSK) 1,532.80p 0.33%
FTSE 100 - Fallers
Entain (ENT) 914.40p -13.41%
Imperial Brands (IMB) 1,641.00p -5.58%
Ocado Group (OCDO) 658.00p -4.80%
Burberry Group (BRBY) 1,910.00p -4.74%
Flutter Entertainment (CDI) (FLTR) 13,540.00p -3.42%
International Consolidated Airlines Group SA (CDI) (IAG) 147.25p -3.12%
British American Tobacco (BATS) 2,627.00p -3.06%
Phoenix Group Holdings (PHNX) 512.60p -2.81%
Severn Trent (SVT) 2,361.00p -2.64%
BT Group (BT.A) 116.25p -2.64%
FTSE 250 - Risers
Foresight Group Holdings Limited NPV (FSG) 480.00p 2.35%
Computacenter (CCC) 2,580.00p 2.06%
Pantheon International (PIN) 299.00p 2.05%
Spire Healthcare Group (SPI) 229.00p 1.78%
The Renewables Infrastructure Group Limited (TRIG) 110.60p 1.47%
Persimmon (PSN) 1,115.00p 1.04%
Bluefield Solar Income Fund Limited (BSIF) 118.80p 1.02%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 272.50p 0.93%
Digital 9 Infrastructure NPV (DGI9) 55.80p 0.90%
Bytes Technology Group (BYIT) 498.20p 0.89%
FTSE 250 - Fallers
888 Holdings (DI) (888) 110.30p -6.76%
TUI AG Reg Shs (DI) (TUI) 452.40p -6.18%
Ceres Power Holdings (CWR) 315.00p -5.75%
Drax Group (DRX) 446.60p -5.44%
Marshalls (MSLH) 258.60p -5.41%
Watches of Switzerland Group (WOSG) 546.00p -4.96%
Ascential (ASCL) 191.90p -4.91%
IP Group (IPO) 55.70p -4.79%
CAB Payments Holdings (CABP) 237.50p -4.23%
Helios Towers (HTWS) 77.00p -4.17%