Portfolio

London close: Stocks stronger ahead of Thursday's BoE decision

By Josh White

Date: Wednesday 03 Aug 2022

London close: Stocks stronger ahead of Thursday's BoE decision

(Sharecast News) - London stocks closed above the waterline on Wednesday, as investors mulled the latest reading on the UK services sector ahead of the Bank of England's scheduled policy announcement on Thursday.
The FTSE 100 ended the session up 0.49% at 7,445.68, and the FTSE 250 was ahead 0.73% at 20,018.84.

Sterling was in negative territory, meanwhile, last trading down 0.21% on the dollar at $1.2145, and weakening 0.11% against the euro to €1.1955.

"European markets have had a more buoyant tone with the news that US House Speaker Nancy Pelosi has left Taiwan for South Korea, leaving the heightened tensions of the last few days behind her, and the risk of a confrontation much diminished," said CMC Markets chief market analyst Michael Hewson.

"With those geopolitical concerns potentially behind us in the short term, attention has returned to earnings numbers both current and upcoming, although the FTSE 100 is underperforming its European peers.

"It's still notable that the UK index is being led higher by resilience in tech and housebuilders, as well as modest gains for BP, Shell, and HSBC.

"Defensives are acting as a drag, with AstraZeneca, GSK and National Grid all slipping back."

In economic news, a survey released earlier showed the UK services sector growing at the slowest pace since February last year in July, as inflationary pressures dampened demand.

The S&P Global/CIPS UK services purchasing managers' index fell to 52.6 in July from 54.3 in June, coming in below the preliminary estimate of 53.3.

S&P's composite PMI output index - which covers the services and manufacturing sectors - fell to 52.1 from 53.7.

That also marked the slowest rate of expansion since last February, and was below the flash estimate of 52.8.

"UK service providers reported their worst month for business activity expansion since the national lockdown in February 2021," said Tim Moore, economics director at S&P Global Market Intelligence.

"Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand across the service economy.

"The near-term outlook also looks subdued, as new order growth held close to June's 16-month low and business optimism was the second-weakest since May 2020."

On the continent, retail sales in the euro area dropped 1.2% month-on-month in June, according to Eurostat, making for the steepest decline year-to-date and significantly worse than expectations of an unchanged print.

June's fall in sales, which follows a 0.4% rise in May, comes as rising consumer prices, increased borrowing costs and low confidence combined to weigh on consumer spending throughout the month.

Sales fell in both the food, drinks, and tobacco segment, down 0.4% for a third consecutive monthly drop, and non-food items, dropping 2.6% month-on-month.

Eurozone business activity, meanwhile, contracted in July amid a downturn in the manufacturing sector and as service sector activity slowed.

The S&P Global eurozone PMI composite output index - which measures activity in both the manufacturing and services sectors - fell to 49.9 from 52.0 in June, coming in below the 50.0 mark that separates contraction from expansion and marking the first dip below since February 2021.

The manufacturing sector was a significant drag as production volumes fell at the fastest rate since May 2020.

Services activity continued to rise overall, but growth slowed to its weakest since the Omicron-related disruption at the start of the year.

Across the pond, activity in the United States services sector accelerated unexpectedly in July, according to a closely-followed survey.

The Institute for Supply Management's services purchasing managers' index improved to 56.7 in July, from a reading of 55.3 for June.

Economists had pencilled in a decline to 53.9 for the headline index.

In energy markets, OPEC and its main allies, together known as OPEC+, revised their combined output quotas for September higher, but by far less than in the previous month.

Producer nations agreed on a 100,000 barrels-per-day hike in their quotas for the month, following the 648,000-barrel daily increase decided on for August.

Brent crude futures slipped in response, however, possibly as some analysts had been anticipating that the cartel would be unable to continue raising its quotas at the same pace as earlier in the year due to a lack of spare capacity in most member countries.

On London's equity markets, British Gas owner Centrica slumped 4.08% after a downgrade to 'neutral' at Citi, while Kingfisher was knocked 1.08% lower by a downgrade to 'sell' at Societe Generale.

Ascential was down 3% after a downgrade to 'hold' from 'buy' at Berenberg, while BAE Systems reversed earlier gains to close down 0.67% despite an upgrade to 'overweight' from 'neutral' at JPMorgan Cazenove.

Hiscox slipped 0.66% by the close, after the insurer said it swung to an interim loss despite a strong underwriting performance.

Hill & Smith fell 3.32%, despite the company reporting a jump in first-half profit and revenue on Wednesday as it took pricing actions to recover input cost inflation.

Ferrexpo lost 1.96% after the miner reported a 31% decline in first-half revenues to $936m, as a result of lower production and tighter market conditions.

Underlying EBITDA decreased 44% to $486m, reflecting higher costs, primarily driven by lower production volumes, rising global inflation and energy prices.

On the upside, Avast shares rocketed 43.75% after the Competition and Markets Authority provisionally cleared its $8.6bn acquisition by NortonLifeLock.

Housebuilder Taylor Wimpey gained 5.5% after it said it expected full-year profits to be at the upper end of forecasts, and reported a rise in interim earnings driven by strong selling prices.

Engine maker Rolls-Royce was up 3.41% after the Spanish government approved the sale of its ITP Aero subsidiary to a consortium of investors led by Bain Capital Private Equity.

Virgin Money UK was lifted 2% by an upgrade to 'outperform' at Macquarie, while Endeavour rose 2.16% after it hiked its interim dividend by 43% and hailed "robust" first-half results.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,445.68 0.49%
FTSE 250 (MCX) 20,018.84 0.73%
techMARK (TASX) 4,342.40 0.32%

FTSE 100 - Risers

Avast (AVST) 687.00p 43.75%
Taylor Wimpey (TW.) 126.65p 5.50%
Ocado Group (OCDO) 912.20p 4.90%
Aveva Group (AVV) 2,340.00p 3.59%
Rolls-Royce Holdings (RR.) 90.79p 3.41%
Rightmove (RMV) 652.00p 3.30%
Scottish Mortgage Inv Trust (SMT) 897.00p 3.25%
Smurfit Kappa Group (CDI) (SKG) 3,069.00p 3.12%
Smith & Nephew (SN.) 1,050.00p 3.09%
Entain (ENT) 1,241.50p 3.07%

FTSE 100 - Fallers

Fresnillo (FRES) 676.60p -5.03%
Centrica (CNA) 85.50p -4.08%
Croda International (CRDA) 7,174.00p -3.32%
Airtel Africa (AAF) 154.20p -3.20%
Harbour Energy (HBR) 349.50p -2.21%
Vodafone Group (VOD) 118.86p -1.54%
Sainsbury (J) (SBRY) 217.90p -1.27%
SSE (SSE) 1,770.00p -1.20%
National Grid (NG.) 1,133.50p -1.18%
Intertek Group (ITRK) 4,210.00p -1.13%

FTSE 250 - Risers

ASOS (ASC) 1,067.00p 6.49%
888 Holdings (DI) (888) 149.20p 5.22%
Darktrace (DARK) 399.90p 4.74%
Edinburgh Worldwide Inv Trust (EWI) 201.50p 4.62%
Moneysupermarket.com Group (MONY) 213.20p 4.60%
Carnival (CCL) 706.40p 4.04%
Redrow (RDW) 579.00p 3.95%
Countryside Partnerships (CSP) 290.80p 3.86%
Wizz Air Holdings (WIZZ) 2,331.00p 3.78%
Aston Martin Lagonda Global Holdings (AML) 495.50p 3.68%

FTSE 250 - Fallers

XP Power Ltd. (DI) (XPP) 2,225.00p -7.87%
Synthomer (SYNT) 192.60p -7.05%
Hilton Food Group (HFG) 1,052.00p -4.88%
Abrdn Private Equity Opportunities Trust (APEO) 465.00p -3.54%
Man Group (EMG) 238.20p -3.45%
Hill & Smith Holdings (HILS) 1,238.00p -3.31%
QinetiQ Group (QQ.) 382.20p -3.04%
Ascential (ASCL) 233.20p -3.00%
ICG Enterprise Trust (ICGT) 1,046.00p -2.42%
Direct Line Insurance Group (DLG) 201.80p -2.18%

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