London close: Stocks firmly weaker after 'brutal' start to week
London stocks closed well below the waterline on Monday, after a survey showed that business growth in the UK slid to an 11-month low in January, while growing tensions between Russia and Ukraine also weighed on sentiment.
The FTSE 100 ended the session down 2.63% at 7,297.15, and the FTSE 250 was 3.64% weaker at 21,452.50.
Sterling was also in negative territory, last trading down 0.8% on the dollar at $1.3444, and weakening 0.52% against the euro to €1.1884.
“There had been some hope that the new week might see a more optimistic view prevail, but the catalogue of earnings this week, along with a key Fed meeting, have combined to keep investors firmly in risk-off move,” said IG’s chief market analyst Chris Beauchamp, who characterised the session as a “brutal” start to the week.
“In addition, investors will have spent the weekend reading of troop build-ups around Ukraine and the growing tensions between Russia and the West, providing yet another reason to either sell stocks or sit on the side-lines.”
A closely-watched survey released earlier showed the UK economy faltering in January, after the rapid spread of Omicron weighed heavily on the service sector.
The flash IHS Markit/CIPS UK Composite Output Index fell to an 11 month-low of 53.4, compared to December’s final reading of 53.6.
Most analysts had expected a rise, with consensus at 54.0.
Within that, the flash manufacturing output index strengthened to a five-month high of 53.8 from 53.6 in December.
But the manufacturing PMI eased to 56.9 from 57.9, while the services business activity index was 53.3, an 11 month-low compared to December’s 53.6.
Manufacturers fared better during the month as material shortages started to ease, but staff absences affected all sectors, while input cost inflation remained "stubbornly high", largely reflecting stronger cost pressures in the service sector.
“A resilient rate of economic growth in the UK during January masks wide variations across different sectors,” said Chris Williamson, chief business economist at IHS Markit.
“Consumer-facing businesses have been hit hard by Omicron, and manufacturers have reported a further worrying weakening of order book growth.
“But other business sectors have remained encouragingly robust.”
Looking ahead, Williamson said that while the Omicron wave meant the hospitality sector sunk into a third steep downturn, restrictions were now easing, meaning the downturn should be brief.
Elsewhere, calls by a senior Conservative backbencher to scrap a planned UK National Insurance rise were dismissed by the prime minister.
Speaking on Radio 4’s Today on Monday morning, former Brexit minister David Davis said the proposed 1.25% rise would remove around 10% of disposable income from "ordinary families".
He also cast doubt over claims the increase would raise the sums predicted.
Calling the move "economically unwise", Davis argued it would instead disincentivise work, penalise employers and "hit the growth of the whole economy".
The prime minister, however, dismissed Davis' concerns.
Asked about the rises by journalists while on a visit to a hospital later on Monday, Boris Johnson said: "The NHS has done an amazing job but it has been under terrible strain.
"We’ve got to put that money in. We’ve got to make that investment in our NHS. If you want to fund our fantastic NHS, we have to pay for it, and this government is determined to do so."
From April, employees, companies and the self-employed will pay 1.25p more in the pound in NI.
The rise was voted through Parliament last September and is supposed to help fund the NHS and social care.
In equity markets, housebuilders were under the cosh, with Barratt Developments down 8.9% and Berkeley Group 6.41% weaker after downgrades at Jefferies.
Computacenter reversed earlier gains to close down 2.82%, even after it forecast annual profits to be slightly in excess of £250m following a better-than-expected fourth quarter.
Miner Glencore was 5.32% weaker after a downgrade to ‘neutral’ at Bank of America Merrill Lynch, while Baltic Classifieds Group slumped 9.8% after funds advised by Apax Partners LLP sold a 7% stake in the company on Friday, for around £78m.
Embattled cyber security firm Darktrace was in the wars again, tumbling 14.62% after it was recently booted out of the blue-chip FTSE 100 index.
Cineworld gave up recent gains to close down 8.7%, as investors booked their profits.
Entertainment stocks had come under pressure over fears that interest rate hikes and inflation could curb discretionary consumer spending.
On the upside, Unilever rallied 7.31% following reports that Nelson Peltz’s activist hedge fund Trian had built a stake in the consumer goods maker.
Vodafone Group gained 4.52% following reports that it was looking at buying Three UK, and had also entered talks with rival Iliad to strike a deal to merge their businesses in Italy.
Playtech shares were up 4.4% after a takeover for the gaming equipment maker by Australia's Aristocrat Leisure looked more likely now that a bid by ex Formula One boss Eddie Jordan had been pulled.
Outside the FTSE 350, De La Rue plunged 23.33% after the banknote printer warned over full-year profits, pinning the blame on Covid-related disruptions and supply chain issues.
FTSE 100 - Risers
Unilever (ULVR) 3,943.50p 7.31%
Vodafone Group (VOD) 122.86p 4.53%
British American Tobacco (BATS) 3,184.50p 1.48%
Meggitt (MGGT) 736.80p 0.52%
B&M European Value Retail S.A. (DI) (BME) 545.80p 0.52%
Avast (AVST) 604.40p 0.40%
Imperial Brands (IMB) 1,736.00p 0.29%
BAE Systems (BA.) 598.00p 0.17%
Sainsbury (J) (SBRY) 284.00p 0.11%
Tesco (TSCO) 288.00p -0.26%
FTSE 100 - Fallers
Pearson (PSON) 599.00p -9.10%
Barratt Developments (BDEV) 614.40p -8.90%
Scottish Mortgage Inv Trust (SMT) 1,019.00p -8.16%
Evraz (EVR) 497.90p -7.90%
Polymetal International (POLY) 1,134.50p -7.05%
International Consolidated Airlines Group SA (CDI) (IAG) 147.80p -6.34%
Berkeley Group Holdings (The) (BKG) 4,101.00p -6.16%
Pershing Square Holdings Ltd NPV (PSH) 2,600.00p -6.14%
Taylor Wimpey (TW.) 147.05p -6.13%
Persimmon (PSN) 2,393.00p -6.12%
FTSE 250 - Risers
Playtech (PTEC) 605.50p 4.49%
Safestore Holdings (SAFE) 1,232.00p 0.57%
BH Macro Ltd. GBP Shares (BHMG) 3,800.00p 0.53%
Beazley (BEZ) 487.80p 0.31%
Ultra Electronics Holdings (ULE) 2,972.00p 0.27%
Hiscox Limited (DI) (HSX) 939.20p 0.17%
Vivo Energy (VVO) 131.60p 0.15%
3i Infrastructure (3IN) 353.00p 0.14%
Sanne Group (SNN) 913.00p 0.11%
Hipgnosis Songs Fund Limited C Shs NPV (SONC) 112.50p 0.00%
FTSE 250 - Fallers
Darktrace (DARK) 362.00p -14.62%
Molten Ventures (GROW) 744.00p -11.22%
Reach (RCH) 238.00p -11.03%
Trustpilot Group (TRST) 193.40p -9.96%
Baltic Classifieds Group (BCG) 179.50p -9.80%
Capita (CPI) 31.76p -9.59%
Aston Martin Lagonda Global Holdings (AML) 1,141.00p -8.68%
Blackrock Throgmorton Trust (THRG) 789.00p -8.68%
Impax Environmental Markets (IEM) 414.50p -8.60%
Cineworld Group (CINE) 38.45p -8.34%