London close: Stocks finish lower on economy, oil price concerns
London stocks were still in the red by the end of trading on Wednesday after three days of gains, after investors digested the latest reading on UK business activity and turned to an OPEC+ meeting on oil supply.
The FTSE 100 ended the session down 0.48% at 7,052.62, and the FTSE 250 was 1.46% lower at 17,562.42.
Sterling was also in negative territory, last trading down 1.56% on the dollar at $1.1297, while it weakened 0.48% against the euro to change hands at €1.1435.
“Equities are eating into the gains of the past two sessions, with OPEC’s decision to go for a big cut in output has not helped the buyers to keep control,” said IG chief market analyst Chris Beauchamp.
“The prospect of two million barrels of daily oil output being eliminated raises the spectre of inflation again, just as the market began to hope that oil prices at least had calmed down.
“Of course, high volatility is a given at this point and stocks are still firmly up on where they were two days ago, but this bear market bounce is looking very shaky after just 48 hours.”
On the political front, prime minister Liz Truss defended her government's plans to cut taxes earlier, insisting they were both "morally and economically" right.
Appearing after a turbulent few days, which saw the government U-turn on the proposed abolition of the 45p higher rate of tax, Truss told the Conservative party conference: "These are stormy days. We are dealing with the global economic crisis caused by Covid and Putin’s appalling war in Ukraine.
But she also acknowledged that "we need to get Britain moving. We cannot have any more drift and delay at this vital time".
Her priorities for the economy, she said, were "growth, growth, growth", which she would deliver by cutting taxes, keeping an "iron grip on the nation’s finances" and driving economic reforms.
"We will lower our tax burden. The Conservative party will always be the party of low taxes. Cutting taxes is the right thing to do morally and economically."
Telling the audience "I love enterprise", Truss added: "We must break down barriers to growth built up over decades.
"As a result economic growth has been choked off."
She did not give any further details, nor were any new policies announced. But she did take aim at an apparent "anti-growth coalition".
The PM said: "I will not allow the anti-growth coalition to hold us back.
"Labour, the Lib Dems, the SNP. The militant unions, the vested interests dressed up as think tanks…the Brexit deniers, Extinction Rebellion. The fact is they prefer protesting to doing, tweeting to making hard decisions."
Her speech was interrupted by two Greenpeace protestors, who heckled Truss and held up a banner asking "Who voted for this?".
In economic news, a new survey released earlier showed UK business activity falling in September to the lowest level since January 2021, when the country was in lockdown.
The S&P Global/CIPS composite purchasing managers’ index (PMI) - which measures activity in both the services and manufacturing sectors - fell to 49.1 in September from 49.6 in August, coming in below the 50.0 mark that separates contraction from expansion for the second month in a row, but above the flash reading of 48.4.
Meanwhile, the PMI for the services sector declined to 50.0 from 50.9 in August as inflationary pressures dented discretionary spending, but was ahead of the flash reading of 49.2.
That still marked the weakest service sector performance since the national lockdown in February 2021.
“September data highlighted an absence of growth in the UK service sector for the first time in 19 months as the energy crisis continued to hit business and consumer spending,” said Tim Moore, economics director at S&P Global Market Intelligence.
“Severe pressure on budgets in the wake of rising inflation, alongside deepening worries about the economic outlook, also led to a reversal in new order volumes for the first time since February 2021.”
Moore said employment trends remained positive in September, with staff numbers increasing at a strong pace as service providers adjusted to post-pandemic requirements.
“However, the pace of job creation has now slowed for three months running amid greater caution about future growth and sporadic reports of hiring freezes.”
Elsewhere, retail analyst Springboard revealed that UK footfall growth slowed in September, as Britons continue to struggle with the current economic situation.
Springboard said UK footfall grew 6.8% year-on-year in September, down from 8.6% in August and 15.6% in July.
Footfall in high streets increased 9.5% in September, down from 13.9% in August, while shopping centre footfall grew 7.7% year-on-year, down from 7.5% in August.
In retail parks, footfall was just 0.3% higher than in 2021.
“The energy price guarantee introduced by the government has eased some of the severe doom felt by many households,” said Diane Wehrle, Springboard's marketing and insights director.
“However, the ongoing rate of inflation combined with the recent rise in interest rates means that from October onwards shoppers will inevitably exercise even greater discretion and be more considered in their purchasing behaviour.
“The impact on footfall and therefore on retail sales will be immediate, with it also being likely that fewer trips will be made to larger centres that incur a greater travel cost.”
Still on data, UK new car registrations rose for the second successive month of growth in September, with registrations increasing 4.6% year-on-year, according to the Society of Motor Manufacturers and Traders (SMMT).
Some 225,269 new cars were registered in September - usually the second biggest month of the year for the industry due to the release of new number plates.
Sales of new cars for the year-to-date were down 8.2% from the same period in 2021.
The SMMT added that more than a million new plug-in electric cars had been registered in the UK, including 249,575 this year alone.
On the continent, S&P Global's eurozone composite PMI fell to 48.1 in September, down 0.1 points from its flash estimate and 0.8pts from the prior month, with both the services and manufacturing PMIs also posting monthly drops.
The manufacturing purchasing managers index was revised lower in September, down from a preliminary reading of 48.5 to a final print of 48.4.
September's PMI reading, down from 49.6 in August, marked the biggest contraction in factory activity since June 2020, with further slides seen in both output and new orders as a result of high energy prices and adjustments to firms' operating schedules due to lower order books.
German imports and exports pushed higher in August according to official data, meanwhile, trimming the trade surplus by more than expected.
According to Destatis, Germany’s exports rose by 1.6% month-on-month in August on a calendar and seasonally-adjusted basis, compared to a revised 1.6% fall in July.
Imports rose by 3.4% on the same basis, compared to July’s 0.1% rise, following a 4.2% month-on-month jump in imports from non-European Union countries.
Oxford Economics said the increase in non-EU imports was "likely driven by elevated commodity energy prices".
Finally, the private sector stateside added more jobs than expected in September, according to the latest data from ADP.
Employment in the US rose by 208,000, versus expectations for a 200,000 jump and up from a revised 185,000 in August.
Small businesses with fewer than 50 employees added 58,000 jobs, while medium businesses with between 50 and 499 employees added 90,000.
Large businesses with more than 500 employees created a further 60,000 jobs.
On London’s equity markets, retailer Tesco fell 4.14% after it said it expected current year profits to be at the lower end of guidance as "significant uncertainties" persisted during the cost-of-living crisis.
The grocery giant said it expected full-year retail adjusted operating profit of between £2.4bn and £2.5bn as it said profits fell 65% to £413m in the six months to 17 August.
J Sainsbury and Ocado Group were also in the red, by a respective 4.65% and 10.04%.
Retailers more generally were also under pressure, with Next down 5.33%, Frasers Group losing 2.47%, and JD Sports Fashion 3.2% lower.
Property firms were also in the red on fears of more interest rate rises, with Capital & Counties down 4.74%, Urban Logistics REIT off 5/84%, UK Commercial Property REIT losing 6.72%, and Warehouse REIT 4.35% lower.
In broker note action, Ascential was knocked 5.22% lower by a downgrade to ‘hold’ at Deutsche Bank.
On the upside, Hill & Smith rallied 4.43% after the engineering services company bought the business and assets of portable solar construction equipment manufacturer National Signal as part of a deal valued at almost $30.0m.
Tullow Oil was also in the green, adding 2.08% amid reports that OPEC and its allies could cut production in an effort to boost crude prices.
Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert and Abigail Townsend.
FTSE 100 - Risers
Shell (SHEL) 2,378.50p 1.73%
Auto Trader Group (AUTO) 544.40p 1.61%
Haleon (HLN) 278.45p 1.55%
BP (BP.) 460.20p 1.25%
London Stock Exchange Group (LSEG) 7,790.00p 0.93%
BAE Systems (BA.) 821.40p 0.83%
Imperial Brands (IMB) 1,898.00p 0.77%
British American Tobacco (BATS) 3,281.50p 0.71%
Whitbread (WTB) 2,490.00p 0.48%
Pearson (PSON) 905.20p 0.42%
FTSE 100 - Fallers
Ocado Group (OCDO) 456.10p -10.04%
Next (NXT) 4,762.00p -5.33%
St James's Place (STJ) 1,029.00p -4.85%
Unite Group (UTG) 842.00p -4.66%
Sainsbury (J) (SBRY) 172.20p -4.65%
Smurfit Kappa Group (CDI) (SKG) 2,575.00p -4.63%
Melrose Industries (MRO) 103.05p -4.32%
Tesco (TSCO) 201.30p -4.14%
Legal & General Group (LGEN) 225.70p -3.96%
SEGRO (SGRO) 724.20p -3.95%
FTSE 250 - Risers
Hilton Food Group (HFG) 597.00p 6.23%
Hill & Smith Holdings (HILS) 1,010.00p 4.43%
Vietnam Enterprise Investments (DI) (VEIL) 637.00p 3.75%
Chemring Group (CHG) 304.00p 3.40%
Hochschild Mining (HOC) 62.55p 2.63%
Bellevue Healthcare Trust (Red) (BBH) 173.80p 2.47%
Essentra (ESNT) 225.00p 2.27%
Tullow Oil (TLW) 46.16p 2.08%
Baillie Gifford Japan Trust (BGFD) 742.00p 1.92%
Wetherspoon (J.D.) (JDW) 426.00p 1.76%
FTSE 250 - Fallers
UK Commercial Property Reit Limited (UKCM) 56.90p -6.72%
CLS Holdings (CLI) 142.20p -6.45%
Urban Logistics Reit (SHED) 129.00p -5.84%
ASOS (ASC) 559.50p -5.49%
Aston Martin Lagonda Global Holdings (AML) 101.65p -5.49%
Wizz Air Holdings (WIZZ) 1,442.00p -5.48%
Marks & Spencer Group (MKS) 96.88p -5.44%
Balanced Commercial Property Trust Limited (BCPT) 75.20p -5.29%
Moneysupermarket.com Group (MONY) 181.70p -5.27%
Ascential (ASCL) 194.30p -5.22%