LONDON MARKET CLOSE: Stocks suffer as investors weigh recession risk

- June concluded on a low note for equities in London on Thursday, as concerns about interest rate hikes, spiralling inflation and the potential of a recession loomed large.

The FTSE 100 index closed down 143.04 points, or 2.0%, at 7,169.28 on Thursday. The index has lost 5.8% over the month of June.

The FTSE 250 ended down 372.01 points, or 2.0%, at 18,666.78 and the AIM All-Share closed down 17.10 points, or 1.9%, at 876.22.

The Cboe UK 100 ended down 1.9% at 715.20, the Cboe UK 250 closed down 2.0% at 16,305.91, and the Cboe Small Companies ended down 1.4% at 13,275.51.

In European equities on Thursday, the CAC 40 in Paris ended down 1.8%, while the DAX 40 in Frankfurt ended down 1.7%.

Data over the past few days have been a mixed bag as investors weigh recession risks.

Figures early Thursday showed the UK economy grew at the same pace as previously estimated. On an annual basis, UK gross domestic product expanded an unrevised 8.7% in the first quarter, picking up pace from 6.6% growth in the final quarter of 2021.

On a quarterly basis, the UK economy grew an unrevised 0.8% in the first quarter, slowing from a 1.3% expansion in the fourth quarter.

Governor Andrew Bailey on Wednesday said the UK economy would likely weaken earlier and be more intense than others as a result of the energy price shock that all European economies face.

The situation was further exacerbated in Britain by the ‘structural legacy’ left by Covid in the labour market as companies struggled with a lack of workers.

On the face of it, Thursday's US inflation data made for encouraging reading. According to the Bureau of Economic Analysis, the core personal consumption expenditures index, which excludes food and energy, grew 4.7% yearly in May, slowing from a 4.9% climb in April. May's figure was in line with a consensus forecast - cited by FXStreet.

The core PCE reading is the US Federal Reserve's preferred inflationary gauge.

However, ING said the activity front ‘is not pleasant viewing’, noting that real consumer spending fell 0.4% month-on-month.

‘The dip in core inflation is encouraging, but at 4.7% it is still more than double the 2% target...Consumer confidence is already fragile while the housing market is making creaking sounds, and with more interest rate hikes to come and the squeeze on spending power from gasoline prices unlikely to be eased anytime soon, the prospects for second-half consumer spending are deteriorating. There is a very clear threat that the prospect of recession is a late 2022 scenario rather than early 2023,’ said ING.

Stocks in New York were lower at the London equities close, with the DJIA down 1.1%, the S&P 500 index down 1.1%, and the Nasdaq Composite down 1.3%.

The dollar strengthened amid Thursday's risk-off mood.

The pound was quoted at $1.2157 at the London equities close Thursday, down compared to $1.2191 at the close on Wednesday. The euro stood at $1.0456 at the European equities close Thursday, down against $1.0531 at the same time on Wednesday.

Against the safe haven Japanese yen, however, the dollar was trading at JP¥135.89, down compared to JP¥136.22 late Wednesday.

In London, miner Anglo American was the worst performer in the FTSE 100, falling 5.3%. Mining stocks came under pressure from global slowdown concerns, failing to receive a boost from data showing China's factory activity picked up in June.

The manufacturing purchasing managers' index rose to 50.2 points in June – similar to analyst expectations – up from 49.6 in May. Any reading over the no-change mark of 50.0 indicates growth.

Despite this, mining stocks such as Rio Tinto, Glencore and Antofagasta closed down 3.6%, 3.3% and 1.5% respectively.

Towards the top of the FTSE 100 was Bunzl, rising 1.8% after lifting annual guidance. The company said it expects to deliver ‘very strong’ growth over the six month period to June 30.

Bunzl said revenue in the first half is expected to increase year-on-year by 16% at actual exchange rates and by 12% to 13% at constant exchange rates, with inflation continuing to drive underlying revenue growth and acquisitions also supplementing progress.

Bunzl upgraded its guidance for the year on the basis of the strong revenue growth to date and announced acquisitions, though no actual figures were provided.

At constant exchange rates, Bunzl now expects ‘very good’ revenue growth in 2022, driven by good organic revenue growth and the positive contribution of acquisitions. Bunzl had previously expected ‘moderate’ annual revenue progress.

In the FTSE 250, Aston Martin sank 8.0% after industry publication Autocar reported the carmaker is seeking to raise funds to safeguard its future.

In response to the share slide, Aston Martin said it regularly keeps its funding options under review and any funding option would be to support and accelerate its future growth.

Aston Martin reassured that it is continuing to trade in line with expectations for 2022. The company reaffirmed its financial guidance for the year, anticipating an 8% rise in core volumes and a 50% improvement in adjusted core earnings before interest, tax, depreciation, and amortization.

Workspace fell 8.9% after Bank of America cut the stock to 'underperform' from 'neutral'.

Elsewhere, shares in Hunting dived 21%, despite the energy services provider expecting to return to bottom-line profitability in the full-year following an in-line-with-expectations performance in the first half.

Interim earnings before interest, tax, depreciation, and amortization are expected in the range of $16 million to $18 million. The previous year, the company reported an Ebitda loss of $3.6 million.

‘A blossoming order book, an upturn in business in the USA and management's forecast of a return to a net profit in 2022 are not proving enough to support shares in Hunting as financial markets continue to fret about a recession and a possible drop in demand for oil,’ said AJ Bell investment director Russ Mould.

Brent oil was quoted at $114.74 a barrel at the London equities close Thursday, down from $117.21 late Wednesday.

Gold was quoted at $1,807.91 an ounce at the London equities close Thursday, down against $1,820.14 at the close on Wednesday.

Friday's economic calendar has Japanese unemployment and a manufacturing PMI overnight, along with manufacturing PMIs from Ireland and China. Later in the morning are manufacturing PMIs from Germany at 0855 BST, the eurozone at 0900 BST and the UK at 0930 BST.

There is eurozone inflation at 1000 BST and US PMIs at 1445 BST and 1500 BST.

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