London midday: Stocks pare losses as banks rally; energy firms plunge
By Michele Maatouk
Date: Tuesday 24 May 2022
(Sharecast News) - London stocks had pared losses by midday on Tuesday, helped by a strong showing in the banking sector, although energy firms remained weak following a report the government is considering a windfall tax on big profits from electricity generators.
The FTSE 100 was down 0.2% at 7,498.18, having opened with sharper losses after disappointing results from Snap across the pond dented sentiment.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The owner of Snapchat notched up fresh worries after the bell on Wall Street by lowering its revenue and profits forecasts for June and blaming the rapidly weakening economic environment.
"That sent the stock into a tailspin, falling more than 30% in after-hours trading, pulling down other battered tech stocks with it, with Meta falling 7% and Pinterest by 11%."
On home shores, a survey showed that business activity slowed sharply in May as inflationary pressures and geopolitical uncertainty weighed on customer demand.
The S&P Global/CIPS composite purchasing managers' index - which measures activity in the services and manufacturing sectors - fell to 51.8 from 58.2 in April, hitting a 15-month low. This was below expectations for a reading of 56.5 and marked the slowest rise in business activity since the current phase of recovery began in March 2021.
Meanwhile, the services PMI slid to 51.8 in May from 58.9 in April, missing consensus expectations of 57.0. The manufacturing PMI declined to 54.6 from 55.8, also below consensus expectations, of 55.0.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The UK PMI survey data signal a severe slowing in the rate of economic growth in May, with forward-looking indicators hinting that worse is to come. Meanwhile, the inflation picture has worsened as the rate of increase of companies' costs hit yet another all-time high.
"The survey data therefore point to the economy almost grinding to a halt as inflationary pressure rises to unprecedented levels. The tailwind from the reopening of the economy has faded, having been overcome by headwinds of soaring prices, supply delays, labour shortages and increasingly gloomy prospects. Companies cite increasingly cautious moods among households and business customers, linked to the cost-of-living crisis, Brexit, rising interest rates, China's lockdowns and the war in Ukraine."
Earlier, data from the Office for National Statistics showed that government borrowing fell more than expected in April but remained above pre-Covid levels. Borrowing fell by £5.6bn from the previous year to £18.6bn, coming in below analysts' forecasts of £18.8bn and the Office for Budget Responsibility's forecast of £19.1bn.
Nevertheless, it remained above pre-Covid levels - up by £7.9bn compared to April 2019 - and was the fourth-highest April borrowing since monthly records began. The ONS cut its estimate for borrowing in 2021/2022 by £7.2bn to £144.6bn.
Meanwhile, the latest survey from the Confederation of British Industry showed that retailers reported average sales for the month of May, but the outlook weakened.
The CBI's reported sales balance rose to -1 from -35 in April, coming in well above consensus expectations of -30. However, the outlook for the sector weakened due to high inflation and broader economic uncertainty, with retailers reining in their investment plans for the year ahead to the greatest extent since May 2020.
In equity markets, SSE, Drax and Centrica all tumbled following a Financial Times report that Chancellor Rishi Sunak has ordered a plan for a windfall tax on electricity generators. In addition, SSE and Drax were knocked lower by downgrade to 'neutral' and 'sell' respectively at Citi.
Elsewhere, Royal Mail was on the back foot after a downgrade to 'sell' at Peel Hunt.
On the upside, banks gained, with Barclays, HSBC and Standard Chartered among the top risers on the FTSE 100.
SSP rallied after the Upper Crust owner said it swung to an interim core profit as the travel sector rebounded from Covid restrictions but warned inflationary pressures would increase in the second half.
Convenience food manufacturer Greencore also rose after saying it swung to an interim profit as revenues grew and that it would resume the return of £50m to shareholders.
Market Movers
FTSE 100 (UKX) 7,498.18 -0.20%
FTSE 250 (MCX) 20,005.02 -0.70%
techMARK (TASX) 4,420.45 0.12%
FTSE 100 - Risers
Barclays (BARC) 163.22p 3.47%
HSBC Holdings (HSBA) 515.10p 2.81%
Standard Chartered (STAN) 614.80p 2.13%
Smurfit Kappa Group (CDI) (SKG) 3,144.00p 1.58%
Vodafone Group (VOD) 128.08p 1.57%
BT Group (BT.A) 190.45p 1.55%
Avast (AVST) 491.40p 1.07%
Airtel Africa (AAF) 150.20p 0.94%
Sage Group (SGE) 676.80p 0.92%
Halma (HLMA) 2,183.00p 0.88%
FTSE 100 - Fallers
SSE (SSE) 1,746.00p -8.90%
Scottish Mortgage Inv Trust (SMT) 711.00p -4.07%
Royal Mail (RMG) 318.90p -3.95%
ITV (ITV) 71.50p -3.85%
Harbour Energy (HBR) 430.10p -3.74%
WPP (WPP) 934.60p -3.19%
JD Sports Fashion (JD.) 120.10p -2.87%
Hargreaves Lansdown (HL.) 852.20p -2.36%
Aveva Group (AVV) 2,159.00p -2.17%
Flutter Entertainment (CDI) (FLTR) 9,146.00p -2.10%
FTSE 250 - Risers
SSP Group (SSPG) 255.00p 8.19%
Moonpig Group (MOON) 282.40p 8.12%
Greencore Group (CDI) (GNC) 113.00p 5.31%
Helios Towers (HTWS) 113.70p 2.62%
Assura (AGR) 70.10p 2.56%
Big Yellow Group (BYG) 1,313.00p 2.10%
TP Icap Group (TCAP) 124.80p 1.96%
Essentra (ESNT) 319.00p 1.59%
Investec (INVP) 490.50p 1.47%
Cranswick (CWK) 3,202.00p 1.39%
FTSE 250 - Fallers
Drax Group (DRX) 679.50p -16.32%
Centrica (CNA) 79.68p -11.07%
Greencoat UK Wind (UKW) 151.70p -4.65%
Kainos Group (KNOS) 1,175.00p -4.55%
Ferrexpo (FXPO) 173.90p -4.08%
Hochschild Mining (HOC) 108.00p -3.23%
Jlen Environmental Assets Group Limited NPV (JLEN) 120.00p -3.07%
Aston Martin Lagonda Global Holdings (AML) 653.00p -2.94%
Frasers Group (FRAS) 656.00p -2.81%
Network International Holdings (NETW) 216.60p -2.78%
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