London midday: Stocks stay down ahead of UK PM announcement
London stocks were still down by midday on Monday as gas prices surged after Russia indefinitely suspended gas flows through the Nord Stream 1 pipeline to Germany, and as investors waited to find out who will be the next UK prime minister.
The FTSE 100 was 0.6% lower at 7,234.27, but faring better than its European counterparts amid weakness in the pound. Sterling was trading just above $1.15, having earlier hit its lowest level since March 2020.
A weaker pound tends to benefit the top-flight index, as around 70% of its constituents derive their earnings from overseas. Strength in the heavily-weighted mining sector also lent a hand.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "Europe’s energy crisis has lurched into another critical phase after the indefinite shutdown of the Nord stream pipeline. These are the worst-case scenario fears that European leaders had been bracing for. Ostensibly the reason for the closure is an oil leak in one of the turbines, but industry experts have called into question the necessity of a move of this magnitude given the repairs required.
"Instead, it seems energy is Russia’s big weapon in the ongoing war with Ukraine. Turning off the gas taps appears to be a response by Russia to a planned price cap on its oil, designed to cause blackouts and rationing and further financial pain for companies and consumers across Europe. The price of natural gas futures, traded in Europe surged by 30% earlier before dipping back a little."
On home shores, the new UK prime minister is expected to be announced around 1230 BST, with Liz Truss and Rishi Sunak in the running. Truss is seen as the frontrunner, amid reports she is planning a freeze on energy bills.
In the meantime, investors were mulling over the latest survey from S&P Global/CIPS, which showed that growth in the UK services sector eased to an 18-month low in August.
The purchasing managers’ index for the sector fell to 50.9 from 52.6 in July. This was above the 50.0 mark that separates contraction from expansion, but below the flash estimate and consensus of 52.5.
The survey found that although sales continued to rise, growth was only modest amid growing economic uncertainty, reduced client confidence and worries over high inflation. S&P Global/IPS said cost pressures remain extremely elevated due to rising energy, fuel, and utility bills, with confidence about the future again historically subdued.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The latest PMI data signal that the economy is on the brink of a recession.
"The services PMI fell to its lowest level since February 2021, and likely is consistent with overall services output flatlining, given its exclusion of public sector activities- which likely fell again due to the winding-down of Covid testing and vaccinations- and the tendency for the PMI to give an overly upbeat steer on growth in real GDP when inflation is high."
In equity markets, veterinary pharmaceuticals group Dechra slumped even as it posted a rise in full-year profit and revenue.
Aston Martin slid after the luxury car maker confirmed a £575.8m rights issue, supported by chairman Lawrence Stroll and Saudi Arabia’s sovereign wealth fund. The issue price was 103p per share, which is a discount of 78.5% to the closing share price on Friday.
On the upside, mining stocks were among the top performers as metals prices rose, with Glencore, Antofagasta, Anglo and Rio all up.
Countryside Partnerships rallied after it agreed to be bought by housebuilder Vistry in a £1.25bn deal. Under the terms of the acquisition, Vistry will pay 0.255 of a new Vistry share and 60p per share in cash.
FTSE 100 - Risers
Glencore (GLEN) 472.10p 4.16%
Antofagasta (ANTO) 1,130.00p 2.59%
BAE Systems (BA.) 783.60p 2.51%
Harbour Energy (HBR) 484.20p 2.37%
Anglo American (AAL) 2,790.00p 1.40%
BP (BP.) 459.45p 1.27%
Rio Tinto (RIO) 4,753.50p 1.13%
Pearson (PSON) 898.80p 0.92%
Shell (SHEL) 2,341.00p 0.73%
National Grid (NG.) 1,079.00p 0.47%
FTSE 100 - Fallers
Dechra Pharmaceuticals (DPH) 3,154.00p -9.78%
Smurfit Kappa Group (CDI) (SKG) 2,805.00p -4.88%
Ocado Group (OCDO) 676.80p -3.86%
Intermediate Capital Group (ICP) 1,268.50p -3.68%
Melrose Industries (MRO) 128.85p -3.45%
Coca-Cola HBC AG (CDI) (CCH) 1,909.00p -3.22%
Flutter Entertainment (CDI) (FLTR) 10,045.00p -3.13%
CRH (CDI) (CRH) 3,096.50p -3.11%
Hargreaves Lansdown (HL.) 791.20p -2.99%
Spirax-Sarco Engineering (SPX) 10,235.00p -2.94%
FTSE 250 - Risers
Countryside Partnerships (CSP) 241.20p 5.70%
Tullow Oil (TLW) 51.30p 3.89%
Energean (ENOG) 1,309.00p 3.81%
Fidelity Emerging Markets Limited Ptg NPV (FEML) 623.20p 2.87%
Diversified Energy Company (DEC) 131.90p 2.65%
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 169.20p 2.55%
Bridgepoint Group (Reg S) (BPT) 283.60p 2.38%
Baltic Classifieds Group (BCG) 136.20p 2.25%
BH Macro Ltd. GBP Shares (BHMG) 4,775.00p 2.25%
Darktrace (DARK) 513.00p 1.79%
FTSE 250 - Fallers
Aston Martin Lagonda Global Holdings (AML) 430.30p -10.37%
Tyman (TYMN) 208.50p -8.75%
ASOS (ASC) 644.00p -5.99%
TI Fluid Systems (TIFS) 138.60p -4.15%
Molten Ventures (GROW) 328.00p -3.87%
4Imprint Group (FOUR) 3,550.00p -3.66%
TUI AG Reg Shs (DI) (TUI) 125.75p -3.60%
Liontrust Asset Management (LIO) 814.00p -3.55%
Chrysalis Investments Limited NPV (CHRY) 72.20p -3.48%
Wizz Air Holdings (WIZZ) 2,024.00p -3.44%