London close: Stocks slip ahead of FOMC minutes, Autumn Statement
By Josh White
Date: Tuesday 21 Nov 2023
(Sharecast News) - London stocks finished in the red on Tuesday as investors examined the latest UK borrowing data ahead of Wednesday's Autumn Statement.
Market participants were also closing their wallets ahead of the release of Federal Open Market Committee (FOMC) minutes across the pond.
The FTSE 100 closed down 0.19% at 7,481.99, while the FTSE 250 saw a more significant decline, finishing 1.35% lower at 18,347.63.
In currency markets, sterling was last up 0.3% on the dollar, trading at $1.2542, while it recorded a 0.25% increase against the euro to change hands at €1.1460.
"Ahead of Nvidia's after-hours earnings, Wednesday's FOMC minutes and the prolonged Thanksgiving weekend, traders have cashed in some of their last three-week strong equity gains as corporate results from big US retailers disappoint," said IG senior market analyst Axel Rudolph.
"Fresh 2010 lows in US existing home sales and the lowest US national activity in seven months also dampened the mood.
"Most European equity indices also slipped into the red as earnings season is coming to an end."
UK public borrowing comes in lower than thought
In economic news, UK public borrowing for the first seven months of the financial year came in lower than anticipated in fresh official data.
The Office for National Statistics (ONS) reported that government borrowing between April and October amounted to £98.3bn.
While that was £22bn higher than the prior year, it was nearly £17bn short of the forecast made by the Office for Budget Responsibility (OBR) back in March.
The numbers intensified calls for Chancellor Jeremy Hunt to consider tax relief for families, particularly in light of recent decisions by him and Prime Minister Rishi Sunak to freeze income tax thresholds, inadvertently pushing many into higher tax brackets - a phenomenon known as fiscal drag.
The prolonged freezing of the thresholds, coupled with the surge in inflation, was expected to generate around £54bn in revenue by 2027-2028 - a significant departure from the initial Treasury estimate of £8bn over four years.
Furthermore, October saw UK public sector net borrowing, excluding banks, reach £14.9bn, marking the second-highest level of borrowing for that month since records began in 1993.
The figure surpassed both consensus expectations and the OBR's March projection of £13.7bn.
On a somewhat brighter note, tax receipts for October increased year-on-year, amounting to £57.9bn, which was £2.7bn higher than the previous year.
"Although borrowing in October was only £3bn less than in October 2020 at the height of the pandemic when billions were being spent on expensive programmes such as the furlough scheme, the government's finances are in a much better position than the OBR had predicted earlier this year," said Interactive Investor head of investment Victoria Scholar.
"This potentially provides some wiggle room for Chancellor Jeremy Hunt when he makes his announcements tomorrow.
"So far, the government has been trying to stick with fiscal prudence, refraining from tax cuts and spending increases where possible in order to provide a fiscal backdrop that supports the Bank of England's inflation-combative monetary tightening path."
Meanwhile, across the Atlantic, the National Association of Realtors (NAR) reported a notable decline in the sale of previously owned homes in the United States during October.
Existing-home sales experienced a 4.1% drop, falling to 3.79 million units from September's 3.96 million.
Analysts had expected a more modest decrease to 3.90 million.
Compared to October last year, that represented a 14.6% decline from the 4.44 million units sold.
"Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation," said NAR chief economist Lawrence Yun.
"Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market."
IAG descends, Coca-Cola HBC jumps on fresh buyback
On London's equity markets, International Airlines Group (IAG) descended 4.71% after the owner of British Airways and Iberia unveiled its medium-term targets and expressed its intent to resume dividend payments once its financial position and investment plans were deemed secure.
IT services firm Softcat faced a 4.53% drop following a downgrade from 'neutral' to 'underweight' by JPMorgan Cazenove, which cited a more challenging outlook relative to peers that hadn't yet been fully reflected in the stock's premium valuation.
Workspace Group tumbled 6.86% after revealing a substantial first-half loss, primarily due to a £178m reduction in property valuations.
In the energy sector, several stocks struggled, with Harbour Energy, Ceres Power, Drax Group, and energy investment firm Foresight Group all ending the day in negative territory.
Electrical goods retailer AO World slipped 1.95%, erasing earlier gains.
The company initially rose after raising its full-year profit guidance despite a sales decline in the first half.
On the upside, Coca-Cola HBC surged by 4.44% after announcing a share buyback programme aimed at returning up to €400m to shareholders.
JD Sports Fashion climbed 4.1%, benefiting from an improved full-year outlook by US peer Dick's Sporting Goods following a solid third quarter.
Admiral Group and Direct Line Insurance Group both experienced gains, with Admiral receiving an 'upgrade' from 'sell' to 'buy' at Citi, while Direct Line has its 'buy' rating reiterated.
CRH advanced by 2.76% after revising its full-year earnings guidance upward and announcing a $2.1bn acquisition of cement and ready-mixed concrete assets in Texas from Martin Marietta Materials.
Food producer Cranswick rallied by 2.63% on the back of strong interim profit and revenue figures, with adjusted pre-tax profit expected to be at the upper end of market consensus for the year.
Business process outsourcing group Capita surged by 8.12% after revealing plans to cut 900 jobs as part of an intensified cost-saving programme.
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 7,481.99 -0.19%
FTSE 250 (MCX) 18,347.63 -1.35%
techMARK (TASX) 4,090.04 -0.21%
FTSE 100 - Risers
Coca-Cola HBC AG (CDI) (CCH) 2,176.00p 4.16%
JD Sports Fashion (JD.) 144.60p 3.95%
CRH (CDI) (CRH) 4,873.00p 2.74%
Admiral Group (ADM) 2,692.00p 2.67%
National Grid (NG.) 1,037.50p 1.67%
Reckitt Benckiser Group (RKT) 5,406.00p 1.46%
Taylor Wimpey (TW.) 127.80p 1.27%
InterContinental Hotels Group (IHG) 6,162.00p 1.08%
Barratt Developments (BDEV) 492.40p 1.07%
Endeavour Mining (EDV) 1,730.00p 1.05%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 155.45p -4.98%
Ocado Group (OCDO) 567.00p -4.83%
Entain (ENT) 831.60p -3.21%
SEGRO (SGRO) 809.40p -2.62%
Land Securities Group (LAND) 639.80p -2.44%
Unite Group (UTG) 961.00p -2.34%
Flutter Entertainment (CDI) (FLTR) 12,775.00p -2.26%
Prudential (PRU) 919.40p -2.19%
Burberry Group (BRBY) 1,545.50p -2.18%
Centrica (CNA) 148.05p -1.89%
FTSE 250 - Risers
Baltic Classifieds Group (BCG) 216.50p 3.10%
Direct Line Insurance Group (DLG) 189.80p 2.93%
Auction Technology Group (ATG) 617.00p 2.66%
Cranswick (CWK) 3,712.00p 1.87%
Senior (SNR) 167.80p 1.70%
QinetiQ Group (QQ.) 320.00p 1.52%
NCC Group (NCC) 112.80p 1.08%
Tate & Lyle (TATE) 631.50p 1.04%
Worldwide Healthcare Trust (WWH) 296.00p 1.02%
Britvic (BVIC) 839.00p 0.90%
FTSE 250 - Fallers
Workspace Group (WKP) 547.50p -7.20%
Telecom Plus (TEP) 1,582.00p -7.05%
Great Portland Estates (GPE) 400.80p -5.02%
Ceres Power Holdings (CWR) 209.20p -4.91%
Genus (GNS) 2,112.00p -4.78%
Softcat (SCT) 1,240.00p -4.76%
Pets at Home Group (PETS) 294.00p -4.73%
Drax Group (DRX) 429.20p -4.66%
Jupiter Fund Management (JUP) 82.05p -4.59%
Syncona Limited NPV (SYNC) 119.00p -4.49%
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