LONDON MARKET CLOSE: Stocks sent lower as recession fears return

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- Stocks in London gave back some of their recent gains on Wednesday, as news of a crash in US consumer confidence and inflation surprises in Europe left investors unnerved.

The FTSE 100 index closed down 11.09 points, or 0.2%, at 7,312.32. The FTSE 250 ended down 312.48 points, or 1.6%, at 19,038.79, and the AIM All-Share closed down 14.29 points, or 1.6%, at 893.32.

The Cboe UK 100 ended down 0.2% at 729.10, the Cboe UK 250 closed down 1.8% at 16,643.76, and the Cboe Small Companies ended down 0.8% at 13,467.65.

Downbeat US consumer confidence data on Tuesday raised recession fears once more, with the Conference Board's consumer confidence index dropping to 98.7 in June from 103.2, its lowest level since February 2021.

Feelings about the present situation dipped slightly, while expectations for income and business in the next six months dropped sharply to 66.4 from 73.7, the lowest level since March 2013, the report said.

Giving traders further pause for thought were some mixed inflation readings in Europe on Wednesday.

Data in the morning showed consumer price inflation in Spain hit double digits in June. Annually, the consumer price index surged 10.2% in June, accelerating from the 8.7% increase seen in May. INE noted that if June's inflation holds true, it will be the highest rise seen since April 1985.

The overshoot spooked markets. But hours later, there was another surprise - this time an inflation undershoot in Germany.

According to a Destatis estimate, Germany's annual inflation rate slowed to 7.6% in June, from 7.9% in May. The figure for June was below an FXStreet cited forecast of 8%.

The euro stood at $1.0470 at the European equities close Wednesday, down against $1.0531 at the same time on Tuesday.

In European equities on Wednesday, the CAC 40 in Paris ended down 0.9%, while the DAX 40 in Frankfurt ended down 1.7%.

In London, British Land and Land Securities ended as amongst the worst large-cap performers, ending down 8.7% and 6.5% respectively. Bank of America downgraded both property investors to 'underperform' from 'neutral'.

Also suffering from a downgrade was educational publisher Pearson, falling 5.4% after being reduced to 'sell' at UBS.

Meanwhile, B&M European Value Retail was towards the top of the FTSE 100, rising 1.8% after leaving its annual guidance unchanged.

For the 13 weeks to June 25, group revenue was down 2.2% to £1.16 billion from £1.19 billion in the first quarter last year. For B&M UK, revenue was down to £957 million from £1.02 billion.

B&M said, however, that it had seen an ‘improving trend’ with revenue during the quarter. Further, it explained that B&M UK had exceptionally high sales in April 2021, thus distorting the comparison.

Looking ahead, B&M said there is no change to the guidance issued at its annual results in May, with financial 2023 adjusted earnings before interest, tax, depreciation, and amortisation expected to be in the range of £550 million to £600 million. Adjusted Ebitda in financial 2022 came in at £619 million.

In the FTSE 250, shares in online betting and gaming firm 888 Holdings rose 5.5% after the UK government said it will publish a White Paper into gambling reform in coming weeks.

UK Prime Minister Boris Johnson is set to announce restrictions on the industry as part of the review of the 2005 Gambling Act amid concerns current regulations require changes to accommodate the growth of online betting.

The Times reported proposals to prohibit gambling companies from shirt sponsorship were set to be rejected in favour of reaching a voluntary agreement with Premier League clubs, while also keeping the option of legislation in reserve.

Elsewhere, shares in Capita fell 4.3% despite saying trading in the first half of the most recent financial year has been in line with expectations.

In the five months to May 31, the London-based outsourcing services provider said its Public Service division grew by 2% as previously high growth rates started to annualise. Revenue in the Experience division fell by 3%, showing an improving trend from 2021. Additionally, the Portfolio division grew by 5% as businesses recovered from Covid-related impacts.

As a result, the company expects revenue growth of up to 1%, with a solid platform of secured revenue, and a ‘strong pipeline of contract opportunities and markets driven by demand for cost-effective digital solutions’, it asserted.

Lookers rose 3.2% after guiding to full-year profit ahead of expectations.

For the first half of 2022, the car dealer now expects underlying pretax profit of £45 million. This is 10% below the previous year but Lookers noted it was a strong comparable period, particularly during the second quarter when lockdown restrictions were lifted.

Stocks in New York were higher at the London equities close, with the DJIA up 0.4%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.1%.

The pound was quoted at $1.2126 at the London equities close Wednesday, down compared to $1.2191 at the close on Tuesday.

Against the yen, the dollar was trading at JP¥136.69, up compared to JP¥136.22 late Tuesday.

Brent oil was quoted at $118.78 a barrel at the London equities close Wednesday, up from $117.21 late Tuesday. Gold was quoted at $1,816.73 an ounce at the London equities close Wednesday, down against $1,820.14 at the close on Tuesday.

Thursday's economic calendar has PMIs from China out overnight and then UK GDP at 0700 BST, with German retail sales due at the same time. Later in the morning is German unemployment, at 0855 BST, and eurozone unemployment at 1000 BST, before US initial jobless claims at 1330 BST.

The UK corporate calendar has trading statements from Bunzl and Hunting on Thursday, while HgCapital Trust releases half-year results.

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