London close: Stocks mixed as economic jitters continue
London stocks were mixed at the end of trading on Wednesday, as investors sifted through a pile of US data, after earlier being met with uninspiring Chinese factory data, grim UK shop price inflation and a bleak survey on service sector confidence.
The FTSE 100 ended the session up 0.81% at 7,573.05, while the FTSE 250 was down 0.12% at 19,163.33.
Sterling kept its head above the waterline, last rising 0.04% on the dollar to $1.1957, as its strengthened 0.08% against the euro to trade at €1.1584.
“While the UK itself might not have had a golden era in recent months, the FTSE 100 continues to outperform its peers and is now up 1% for the year,” said IG chief market analyst Chris Beauchamp.
“Stronger commodity prices have played a big part in helping the index to best its rivals as indices gird themselves for the final run to year-end, and the lack of a major tech sector has no doubt helped too.
“In tough times, it looks like the solid dividend yields on offer and the index’s undemanding valuation have enticed investors back to the UK market.”
In economic news, shop price inflation ramped up in November, leaving retailers braced for an increasingly difficult Christmas.
According to the latest BRC-NielsenIQ shop price index, annual inflation was 7.4%, compared to October’s 6.6% and the three-month average of 6.5%.
Annual food inflation surged to 12.4%, up from 11.6% in October, while non-food inflation was 4.8%, against 4.1% in October.
“Winter looks increasingly bleak, as pressures on prices continue unabated,” said Helen Dickinson, chief executive of the British Retail Consortium.
“Food prices have continued to soar, especially for meat, eggs and dairy, which have been hit by rocketing energy costs and rising costs of animal feed and transport.
“Christmas gifting is also set to become more expensive than in previous years, with sports and recreation equipment seeing particularly high increases.”
Business optimism across the UK service sector continued to slide over the last three months, meanwhile, according to an industry survey.
The latest CBI service sector survey showed optimism deteriorating for the third consecutive quarter across the sector in the three months to November.
A balance of -55% of firms in business and professional services reported a decline in sentiment, the sharpest fall since May 2020, when the UK was in the first Covid-19 lockdown.
In consumer services, the balance was -48%, although that was an improvement on the -64% seen in August.
“Strong cost and price pressures are continuing to hurt services firms, damaging optimism and investment intentions, and hurting profitability,” said Charlotte Dendy, head of economic surveys at the Confederation of British Industry.
Across the pond, America's economy expanded at a slightly quicker pace than expected over the three months ending in September.
According to the Department of Commerce, US gross domestic product grew at a quarterly annualised clip of 2.9% over the third quarter.
Consensus had been for growth of 2.7%.
Manufacturing sector activity in the Chicago region meanwhile registered an outsized slump in November according to a survey.
Market News International's Chicago factory sector purchasing managers' index cratered to a reading of 37.2.
That was down from an October print of 45.2 and well below economists' forecasts for a reading of 47.0.
Still on US data, hiring in the country slowed by more than expected in November, with consultancy ADP reporting that hiring in America's private sector declined to 127,000 in November, from the 239,000 pace recorded in October.
Economists had pencilled in an increase of 195,000.
“Turning points can be hard to capture in the labour market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains," said ADP chief economist Nela Richardson.
Elsewhere, US mortgage applications fell 0.8% in the week ended 25 November according to the Mortgage Bankers Association, following a 2.2% advance in the previous week.
Applications to refinance a home loan dropped 12.9% and the purchase index rose 3.8%, while the 30-year mortgage rate went down by 18 basis points to 6.49% - the lowest reading since mid-September.
"The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes,” said MBA economist Joel Kan.
“Purchase activity increased slightly after adjusting for the Thanksgiving holiday, but the decline in rates was still not enough to bring back refinance activity.”
Finally, contracts to purchase previously-owned US homes declined for the fifth month in a row in October, albeit slightly less than expected, as higher mortgage rates continued to weigh on the market.
According to the National Association of Realtors, its pending home sales index - based on signed contracts - decreased by 4.6% to 77.1 in October.
Economists had forecast contracts to fall 5.0%.
Earlier in the day, figures from Beijing’s National Bureau of Statistics showed that China’s manufacturing activity shrank faster than expected in November, as Covid restrictions took their toll.
The PMI for the sector fell to 48.0 from 49.2 in October, coming in below consensus expectations of 49.0.
“In November, impacted by multiple factors including the wide and frequent spread of domestic outbreaks, and the international environment becoming more complex and severe, China’s purchasing managers’ index fell,” said NBS senior statistician Zhao Qinghe.
Zhao said domestic Covid outbreaks had caused production activity to slow down and product orders to fall.
The non-manufacturing PMI, meanwhile, declined to 46.7 in November from 48.7 the month before, versus consensus of 48.0.
On London’s equity markets, Rolls-Royce rallied 2.02% after Barclays initiated coverage of the stock at ‘overweight’.
Specialty chemicals company Elementis jumped 6.53% after agreeing to sell its chromium business to Dutch-Turkish industrial firm Yildirim Group for $170m.
Compass Group was in the black by 2.27% after Shore Capital reiterated its ‘buy’ stance on the catering company.
"Compass Group full-year results were strong, with second-half profitability having recovered to pre-Covid levels," the broker said.
"We see further momentum in 2023, driven by continued strength in net gains, further like-for-like recovery and price, with current guidance appearing conservatively set.
“We previously set out a blue-sky scenario for revenues to build beyond £35bn in the medium term.”
Bootmaker Dr. Martens Group gained 6.39% on hopes China would lift Covid restrictions, given the company has a factory in the country, with its products also popular there.
On the downside, Pennon Group was down 2.45% after it said half-year profits tumbled after it was hit by higher costs.
Home REIT reversed earlier gains to tumble 9.32%, even after it published a full response to allegations made by short seller Viceroy Research last week, which sent its shares sliding.
The property sector in general was in the red, with British Land down 2.57% and Land Securities Group 1.03% weaker.
Specialist media publisher Future was 5.26% weaker by the close, despite reporting a rise in full-year profits amid strong revenue growth and contributions from acquisitions.
Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend, Iain Gilbert, and Alexander Bueso.
FTSE 100 - Risers
Anglo American (AAL) 3,407.50p 3.59%
Antofagasta (ANTO) 1,408.50p 3.26%
Endeavour Mining (EDV) 1,731.00p 2.61%
Intertek Group (ITRK) 4,057.00p 2.56%
London Stock Exchange Group (LSEG) 8,248.00p 2.54%
Flutter Entertainment (CDI) (FLTR) 12,195.00p 2.35%
Glencore (GLEN) 565.90p 2.31%
Halma (HLMA) 2,172.00p 2.07%
Rolls-Royce Holdings (RR.) 90.92p 2.02%
SSE (SSE) 1,708.50p 1.94%
FTSE 100 - Fallers
British Land Company (BLND) 395.30p -2.57%
Unite Group (UTG) 922.50p -2.54%
Tesco (TSCO) 227.50p -2.36%
SEGRO (SGRO) 790.80p -2.18%
DCC (CDI) (DCC) 4,389.00p -1.92%
Schroders (SDR) 442.40p -1.86%
Smurfit Kappa Group (CDI) (SKG) 2,960.00p -1.43%
Phoenix Group Holdings (PHNX) 588.80p -1.21%
BT Group (BT.A) 121.40p -1.18%
Legal & General Group (LGEN) 251.60p -1.10%
FTSE 250 - Risers
Elementis (ELM) 115.90p 6.53%
Discoverie Group (DSCV) 836.00p 6.50%
Dr. Martens (DOCS) 203.20p 6.39%
Aston Martin Lagonda Global Holdings (AML) 130.85p 4.72%
Energean (ENOG) 1,485.00p 4.36%
PureTech Health (PRTC) 281.50p 3.68%
Trainline (TRN) 334.40p 3.63%
Wizz Air Holdings (WIZZ) 2,222.00p 3.35%
Molten Ventures (GROW) 390.00p 3.23%
Watches of Switzerland Group (WOSG) 1,026.00p 3.06%
FTSE 250 - Fallers
Home Reit (HOME) 50.10p -10.22%
Synthomer (SYNT) 133.20p -5.46%
Abrdn (ABDN) 194.40p -5.26%
Future (FUTR) 1,405.00p -5.26%
Darktrace (DARK) 341.00p -4.19%
C&C Group (CDI) (CCR) 174.70p -4.12%
Supermarket Income Reit (SUPR) 103.50p -3.72%
Currys (CURY) 77.75p -3.60%
Bridgepoint Group (Reg S) (BPT) 196.50p -3.58%
Warehouse Reit (WHR) 110.00p -3.17%