London close: Stocks lower as government borrowing tops forecasts
By Josh White
Date: Wednesday 22 Jan 2025
(Sharecast News) - London stocks closed lower on Wednesday as investors reacted to higher-than-expected government borrowing figures for December.
The FTSE 100 index slipped 0.04% to finish at 8,545.13 points, while the FTSE 250 declined 0.08% to 20,580.30 points.
In currency markets, sterling was last down 0.27% on the dollar to trade at $1.2317, as it weakened 0.17% against the euro, changing hands at €1.1828.
"Thoughts of tariffs have been banished, if only briefly, from investors' minds thanks to another set of stellar numbers from Netflix," said IG chief market analyst Chris Beauchamp.
"The end of 2024 saw a lot of worry about whether such tech stocks could justify their eye-watering valuations.
"Netflix, at least, has proved it is worthy of its premium rating."
Beauchamp said the news had bolstered risk appetite across the board, with the S&P 500 "knocking on the door" of a new record high, joining those set by the FTSE 100 and DAX in recent sessions.
"An absence of economic news today has not prevented a small recovery in the greenback.
"Fears - or hopes - of immediate tariffs have been misplaced so far, but the announcement of a $500bn investment by Softbank and others suggests that businesses will continue to flock to the US economy now that Trump is in power.
"Notably the dollar has edged higher against the yen despite the likelihood of a Bank of Japan rate hike this week - worries about tariffs and their impact may well cause Japanese policymakers to err on the side of caution when making predictions about the path of rates further into 2025."
UK government borrows more than expected in December, unemployment rises
In economic news, the UK government borrowed significantly more than expected in December, with figures from the Office for National Statistics revealing borrowing of £17.8bn, £10.1bn higher than the same month in 2023.
The figure surpassed the Office for Budget Responsibility's forecast of £14.6bn and market expectations of £14.2bn, marking the highest December borrowing in four years and the third highest on record.
Rising interest costs on central government debt, which increased by £3.8bn to £8.3bn, were largely driven by movements in the retail prices index.
"Against a backdrop of slowing GDP growth and high interest rates, December's overshoot in borrowing is further disappointing news for the Chancellor," said Alex Kerr, UK economist at Capital Economics.
"That said, most of the overshoot was because of a one-off payment and components that are heavily revised so the figures may not be as bad as they first appear.
"But the figures leave the current budget deficit on track to overshoot the OBR's forecast of £55.5bn in the 2024-2025 financial year by around £1.5bn."
Elsewhere, the UK labour market displayed mixed signals, with unemployment rising to 4.4% in the three months to November, as vacancies continued to shrink.
Vacancies fell by 24,000 to 812,000 between October and December, while early estimates suggested a further decline in December payrolls.
However, wage growth accelerated, with average annual growth for regular pay reaching 5.6%, slightly above forecasts, and real terms growth at 2.5%.
"Today's data epitomises the bind the MPC finds itself in," said Mat Swannell, chief economic adviser to the EY Item Club.
"Though pay growth remains resilient and well above target-consistent pace, the jobs outlook is clearly weakening.
"The minutes of December's meeting suggested that the MPC is starting to place more emphasis on concerns about soft output and employment growth, so it's reasonable to expect it will lower Bank Rate by 25 basis points in February and stick to its cut-hold tempo through the rest of 2025."
On the continent, European car sales showed strong regional disparities in December.
Registrations across the EU rose 5.1% year-on-year to 910,505, driven by a 28.8% surge in Spain.
However, sales fell sharply in Germany and Italy, by 7.1% and 4.9% respectively, while France posted modest growth of 1.5%.
For 2024 overall, EU car registrations grew by just 0.8%, with hybrid electric vehicles capturing a larger market share of 30.9%, while battery electric vehicles saw a slight decline to 13.6% compared to the previous year.
Meanwhile, German investor confidence declined in January, as the ZEW Indicator of Economic Sentiment fell to 10.3 from 15.7 in December, below expectations of 15.4.
The drop reflects heightened pessimism among institutional investors as the economy continued to grapple with the aftermath of two consecutive years of recession.
Intermediate Capital in the green, Hochschild Mining slides
On London's equity markets, Intermediate Capital Group jumped 6.46% after reporting strong third-quarter fundraising and a 5.1% increase in quarter-on-quarter assets under management.
Aviva climbed 3.48% following an upgrade to 'overweight' from 'neutral' by JPMorgan, while Halma gained 4.09% after Berenberg lifted its rating to 'buy' from 'hold'.
Diploma rose 1.69% as Berenberg highlighted its consistent long-term growth, describing it as one of the highest-quality UK industrial companies.
The bank noted the firm's strong revenue and earnings growth over the past 15 years, maintaining a 'buy' rating based on management's outlook for sustained organic expansion and high cash flow conversion.
Quilter also performed well, adding 2.08% after reporting a sharp rise in fourth-quarter assets under management, driven by strong net inflows.
On the downside, Auto Trader Group fell 1.87% after BNP Paribas Exane cut its price target on the stock.
EasyJet dropped 4.19% despite reporting a halving of year-on-year losses in the first quarter and a 13% rise in revenue to £2.04bn.
The airline maintained its full-year guidance, citing strong demand ahead of the Easter and summer travel periods.
Hochschild Mining tumbled 17.38% after warning of higher production costs due to inflationary pressures in Argentina and a slower-than-expected ramp-up at its Mara Rosa mine in Brazil.
Trainline slumped 8.52% as the Department for Transport confirmed plans to establish Great British Railways as the primary online ticket retailer, raising concerns about future competition.
JD Wetherspoon edged 1.24% lower after the pub chain warned that increases in the minimum wage would add £60m to costs, despite reporting a 5.1% rise in like-for-like sales over the past 25 weeks, with bar and food sales seeing steady growth.
Reporting by Josh White for Sharecast.com.
Market Movers
FTSE 100 (UKX) 8,545.13 -0.04%
FTSE 250 (MCX) 20,580.30 -0.07%
techMARK (TASX) 4,692.95 -0.04%
FTSE 100 - Risers
Intermediate Capital Group (ICG) 2,258.00p 6.61%
Halma (HLMA) 2,954.00p 4.09%
Entain (ENT) 706.80p 4.00%
Aviva (AV.) 511.20p 3.48%
Games Workshop Group (GAW) 14,350.00p 2.65%
Smiths Group (SMIN) 1,888.00p 2.32%
Spirax Group (SPX) 7,615.00p 2.01%
Scottish Mortgage Inv Trust (SMT) 1,075.00p 1.90%
InterContinental Hotels Group (IHG) 10,580.00p 1.83%
Rolls-Royce Holdings (RR.) 603.40p 1.58%
FTSE 100 - Fallers
easyJet (EZJ) 484.80p -5.16%
United Utilities Group (UU.) 974.40p -2.66%
Centrica (CNA) 134.90p -2.56%
Severn Trent (SVT) 2,477.00p -2.10%
Vodafone Group (VOD) 68.20p -2.07%
Auto Trader Group (AUTO) 776.20p -1.87%
Croda International (CRDA) 3,297.00p -1.79%
Coca-Cola HBC AG (CDI) (CCH) 2,774.00p -1.63%
Rightmove (RMV) 637.20p -1.58%
Unite Group (UTG) 826.00p -1.43%
FTSE 250 - Risers
Alpha Group International (ALPH) 2,500.00p 5.04%
Marshalls (MSLH) 243.50p 2.96%
Dr. Martens (DOCS) 72.25p 2.77%
Allianz Technology Trust (ATT) 446.00p 2.76%
Auction Technology Group (ATG) 599.00p 2.74%
Watches of Switzerland Group (WOSG) 528.50p 2.60%
AJ Bell (AJB) 468.50p 2.40%
Volution Group (FAN) 564.00p 2.37%
Kier Group (KIE) 146.80p 2.37%
Baillie Gifford Japan Trust (BGFD) 733.00p 2.23%
FTSE 250 - Fallers
Hochschild Mining (HOC) 193.40p -15.55%
Trainline (TRN) 358.60p -8.52%
Pennon Group (PNN) 518.00p -3.54%
Carnival (CCL) 1,867.00p -3.24%
Oxford Nanopore Technologies (ONT) 150.40p -2.97%
Ferrexpo (FXPO) 103.20p -2.82%
SThree (STEM) 282.00p -2.59%
Aston Martin Lagonda Global Holdings (AML) 109.80p -2.57%
Bakkavor Group (BAKK) 134.00p -2.55%
Supermarket Income Reit (SUPR) 65.70p -2.53%
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