London close: Stocks weaker on fresh fears of winter lockdowns
London equity markets remained in the red at the close on Friday, dragged down by weakness in travel-related stocks amid fresh consternation over Covid-19 lockdowns.
The FTSE 100 ended the session down 0.45% at 7,223.57, and the FTSE 250 was 0.35% weaker at 23,492.49.
Sterling was in a mixed state, meanwhile, last trading 0.19% weaker against the dollar at $1.3469, as it gained 0.29% on the euro to €1.1905.
“Austria’s lockdown decision has revived the spectre of weaker economic growth, and as a result global stocks are generally lower on the final day of the week,” said IG chief market analyst Chris Beauchamp.
“The FTSE 100 has fallen further to put a resoundingly poor finish on an already dismal week for the premier UK index.”
Beauchamp said oil and commodity prices had taken a toll, but lower yields had hit financial stocks as well, taking around 2% off Barclays, Lloyds and HSBC.
“The middle of these is also under pressure along with homebuilders, this sector coming under pressure as investors worry that a return to lockdowns will result in a decline in the strong levels of activity that have been such a boon for Persimmon, Taylor Wimpey and others.”
Stocks had kicked the session off on a positive note, following the release of upbeat retail sales data and a survey showing a pickup in confidence.
According to figures from the Office for National Statistics, retail sales were up 0.8% on the month, coming in ahead of expectations for a 0.5% increase and leaving sales 5.8% above pre-pandemic February 2020 levels.
September’s sales figure was revised up from a 0.2% fall to flat.
Non-food store sales were the only major component to see month-on-month growth, of 4.2%, with second-hand sales making the biggest contribution.
“Consumers seem to have heeded warnings from some retailers that the best way to make sure they have exactly what they want under the tree this Christmas is to buy early,” said Danni Hewson, financial analyst at AJ Bell.
“Santa’s sack this year will be filled with clothes, toys and games.
“It will also contain a substantial number of second-hand items, whether that’s a reaction to rising prices, to a glut of goods thanks to lockdown clear outs, or because people are thinking more sustainably, the result is the same.”
Consumer confidence, meanwhile, edged up in November despite the rising cost of living but households' view of their own finances remained weak.
The GfK consumer confidence index rose by three points to -14, reversing most of the four-point drop from the month before.
Households were less gloomy about the general economic situation over the past 12 months and the coming year and were marginally more positive about their own finances for the coming year.
“Headline consumer sentiment has ticked upwards this month despite decade-high inflation, fears of higher prices and worries over rising interest rates, and as the deepening cost-of-living squeeze leaves UK household finances worse off this winter,” said Joe Staton, client strategy director at GfK.
“Is this a sign that shoppers are ready to bounce back, after last year’s cancelled family gatherings, with a Christmas splurge in coming weeks?
“That’s how it looks but consumers also know that when the festivities are over it’s going to be a tough year in 2022.”
Finally, fresh figures showed the UK government borrowed more than expected in October as increased interest payments outweighed higher tax receipts.
Public sector net borrowing excluding public sector banks was £18.8bn - the second-highest October reading on record.
Borrowing was £0.2bn less than October 2020's record and £7.2bn more than a year earlier, while total public sector borrowing was £18bn - higher than the £17.6bn average analyst forecast.
“The softer-than-expected performance reflected both slower growth in tax receipts and a rise in government spending,” said Martin Beck, chief economic adviser to the EY Item Club.
“The latter was partly a function of higher debt servicing costs, caused by higher inflation.”
In equity markets, travel and leisure shares paced the decline following news that Austria was imposing a national lockdown from Monday.
British Airways and Iberia owner IAG descended 3.77%, engine maker Rolls-Royce lost 3.87%, Premier Inn owner Whitbread gave up 2.27% and InterContinental Hotels was 1.51% weaker.
Train station and airport caterer SSP Group was down 3.35%, low-cost carriers Wizz Air and easyJet were 4.64% and 2.7% weaker, respectively, and tour operator TUI slid 2.47%.
“With Germany also imposing new restrictions, any thoughts that the vaccines would offer a way to a more normal Christmas period appear to have gone up in smoke for now, in Europe at least, although there is a nagging fear this could ripple out across the region,” said CMC Markets analyst Michael Hewson.
Elsewhere, B&Q owner Kingfisher lost 4.36% after it reported a 2.4% drop in like-for-like sales for the third quarter, but said annual results would be near the top of guidance.
Johnson Matthey was also under pressure, slipping 0.98% after a downgrade to ‘neutral’ from ‘outperform’ at Credit Suisse.
Going the other way, Ocado jumped 6.84% on the back of a Deutsche Bank research note on Marks & Spencer, which suggested it could buy out the online grocer and e-commerce technology firm.
“Cash flow is no longer being squandered on an unsustainable dividend but saved to recover the investment grade credit rating that may be required to buy out Ocado,” the Deutsche Bank note read.
Marks & Spencer itself was 1.95% firmer by the end of trading.
Software company Kainos managed gains of 3.05%, having slid earlier in the week despite reporting a jump in first-half profit and revenue amid "robust" market demand.
Market Movers
FTSE 100 (UKX) 7,223.57 -0.45%
FTSE 250 (MCX) 23,492.49 -0.35%
techMARK (TASX) 4,544.37 -0.21%
FTSE 100 - Risers
Ocado Group (OCDO) 1,899.50p 6.95%
Royal Mail (RMG) 498.50p 3.70%
Rightmove (RMV) 763.60p 2.91%
Auto Trader Group (AUTO) 739.00p 2.78%
SEGRO (SGRO) 1,402.00p 2.75%
Reckitt Benckiser Group (RKT) 6,248.00p 2.33%
Rio Tinto (RIO) 4,463.00p 2.00%
Anglo American (AAL) 2,851.50p 1.89%
B&M European Value Retail S.A. (DI) (BME) 603.00p 1.86%
Croda International (CRDA) 10,035.00p 1.75%
FTSE 100 - Fallers
Compass Group (CPG) 1,486.50p -4.77%
Melrose Industries (MRO) 159.45p -4.41%
Kingfisher (KGF) 322.50p -4.36%
International Consolidated Airlines Group SA (CDI) (IAG) 148.50p -3.77%
BT Group (BT.A) 160.65p -3.66%
Rolls-Royce Holdings (RR.) 136.42p -3.58%
Royal Dutch Shell 'B' (RDSB) 1,610.20p -3.22%
ITV (ITV) 120.70p -3.21%
Royal Dutch Shell 'A' (RDSA) 1,609.40p -3.09%
BP (BP.) 326.55p -2.94%
FTSE 250 - Risers
Baltic Classifieds Group (BCG) 223.00p 4.69%
Kainos Group (KNOS) 1,897.00p 3.27%
LondonMetric Property (LMP) 276.20p 3.06%
Auction Technology Group (ATG) 1,376.00p 2.69%
Safestore Holdings (SAFE) 1,314.00p 2.66%
Indivior (INDV) 253.00p 2.26%
AO World (AO.) 131.50p 2.18%
Volution Group (FAN) 522.00p 2.15%
Future (FUTR) 3,446.00p 2.13%
Marks & Spencer Group (MKS) 240.80p 1.95%
FTSE 250 - Fallers
Mitie Group (MTO) 64.40p -8.00%
Wizz Air Holdings (WIZZ) 4,163.00p -4.87%
National Express Group (NEX) 228.00p -4.12%
Close Brothers Group (CBG) 1,357.00p -4.03%
Playtech (PTEC) 740.50p -3.83%
IWG (IWG) 294.60p -3.57%
SSP Group (SSPG) 254.80p -3.04%
PureTech Health (PRTC) 321.00p -3.02%
Network International Holdings (NETW) 318.80p -2.98%
Mitchells & Butlers (MAB) 233.00p -2.92%