London close: Shell drags lower as stocks finish mixed

London stocks were in a mixed state at the close on Thursday, with Shell under the cosh after a profit warning.

The FTSE 100 ended the session down 0.78% at 6,997.27, while the FTSE 250 was up 0.4% at 17,632.64.

Sterling was in the red, meanwhile, last trading down 1.55% on the dollar at $1.1150, and weakening 0.7% against the euro to change hands at €1.1380.

“Yesterday, OPEC+ announced it would be cutting output by two million barrels per day - a larger cut than anticipated,” said Equiti Capital market analyst David Madden.

“The oil-producing nations want to support the oil market, but a high oil price hurts most nations, so in a roundabout way the move will probably add to global inflation.”

Madden noted that West Texas Intermediate and Brent crude were building on the large gains posted earlier in the week.

“Gold was up earlier because of bargain hunting, but the gains in the US dollar and bond yields are hurting the commodity.”

In economic news, Fitch downgraded the UK’s credit outlook late on Wednesday, citing the government’s recently-announced mini-budget.

The outlook was cut to "negative" from "stable".

“The large and unfunded fiscal package announced as part of the new government's growth plan could lead to a significant increase in fiscal deficits over the medium term,” Fitch said.

The ratings agency maintained its AA- credit rating for the UK - one notch lower than Standard & Poor’s.

Fitch said the change in fiscal trajectory will push general government debt to 109% of GDP by 2024 from an estimated 101% in 2022, reflecting both higher primary deficits and a weaker growth outlook.

"This level would be more than double the forecast 'AA' median of 49%," it said.

It also noted the recent surge in government bond yields, saying this reflects higher interest rates and uncertainty over the fiscal strategy.

Elsewhere, the UK construction sector returned to growth in September, but business expectations hit a 26-month low, according to new survey data.

The S&P Global/CIPS construction purchasing managers’ index (PMI) rose to 52.3 from 49.2 in August, coming above the 50.0 mark that separates contraction from expansion.

Its reading was also comfortably ahead of consensus expectations of 48.0.

Housebuilding was the best-performing category, with growth reaching a five-month high.

Commercial work increased only marginally, while civil engineering activity fell for the third month in a row.

“UK construction companies experienced a modest increase in business activity during September, but the return to growth was fuelled by delayed projects and easing supply shortages rather than a flurry of new orders,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Reports of delivery delays for construction products and materials were the least widespread since the pandemic began as greater business capacity and improved transport availability helped to ease pressure on supply chains.

“However, forward-looking survey indicators took another turn for the worse in September, with new business volumes stalling and output growth expectations for the year ahead now the lowest since July 2020.”

On the continent, retail sales in the euro area fell more quickly than expected last month.

According to Eurostat, the volume of retail sales within the single currency block dipped at a seasonally-adjusted month-on-month pace of 0.3% in August.

However, July's data were revised to show a drop of 0.4%, down from an initial estimate of a rise of 0.3%.

The downturn in eurozone construction continued at pace in September, meanwhile, as prices rose and the weakening economic outlook weighed on demand.

S&P Global’s eurozone construction total activity index came in at 45.3, the fifth consecutive reading under 50.

The survey showed the fastest decline in new work since May 2020, and the weakest 12-month outlook since April 2020.

Still on data, Germany’s factory orders were weaker than expected in August, as the war in Ukraine continued to weigh heavily.

According to Destatis, new orders in the manufacturing sector slid 2.4% on the previous month, and by 4.1% on August 2021.

Analysts had been expecting a decline of around 0.7%.

Finally, jobless claims in the US rose unexpectedly last week.

According to the Department of Labor, the number of initial unemployment claims increased by a seasonally-adjusted 29,000 over the week ended 1 October, to reach 219,000.

Economists at Barclays Research had anticipated a reading of 210,000.

On London’s equity markets, Shell slumped 2.8% after it warned third-quarter profits would be hit by a sharp decline in oil refining margins and weaker natural gas trading.

“Shell enjoyed record profits in the first and second quarter spurred by a surge in underlying oil and gas prices following Russia’s invasion of Ukraine,” said Victoria Scholar, head of investment at Interactive Investor.

“However, since June, oil has posted four consecutive months of declines, with Brent crude down by around 25% even after this week’s countertrend rally.

“In what is a notoriously cyclical business, Shell is grappling with a dysfunctional and volatile gas market as well as expectations of softening oil demand, particularly from China as the global economy cools.”

Elsewhere, Centrica was down 3.09%, Kingfisher was off 3.29% and Synthomer fell 4.88% as they traded without entitlement to the dividend.

In broker note action, Anglo American retreated 3.12% after a downgrade to ‘hold’ from ‘buy’ at Berenberg.

The bank said it was downgrading the stock "on poor operational delivery and a deteriorating macroeconomic sentiment, which we think will weigh on the shares until we see operational delivery and/or better macro sentiment".

Iron ore pellet producer Ferrexpo fell 3.94% after it reported a sharp fall in third-quarter output on Thursday due to Russia’s blockade of Ukraine's Black Sea ports.

The company said production slumped 68% year-on-year to 0.8 million tonnes. Sales fell 65% to 1 million tonnes.

On the upside, tobacco company Imperial Brands jumped 2.48% after it unveiled a £1bn share buyback and said current year trading was in line with expectations.

RS Group - formerly Electrocomponents - managed gains of 0.99% after it said full-year revenue and adjusted pre-tax profit were set to be "slightly ahead" of current consensus estimates following a strong trading year to date.

Volution Group racked up gains of 5.87% after full-year results, while Chemring Group jumped 5.43% after a well-received trading update.

Elsewhere, shares in gambling outfit 888 were up 1.87% as it launched its new Africa venture.

Online trading platform CMC Markets was 5.62% firmer after saying that first-half profits would be ahead of the previous year, following an improvement in underlying market activity through August and September.

In a half-year trading update, the company said net operating income is expected to be around £153m, up 21% on the same period a year ago.

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

Market Movers

FTSE 100 (UKX) 6,997.27 -0.78%
FTSE 250 (MCX) 17,632.64 0.40%
techMARK (TASX) 4,185.93 0.19%

FTSE 100 - Risers

SEGRO (SGRO) 743.20p 2.62%
Imperial Brands (IMB) 1,944.00p 2.48%
Haleon (HLN) 284.15p 2.05%
Informa (INF) 543.20p 1.95%
Ashtead Group (AHT) 4,400.00p 1.78%
Entain (ENT) 1,145.50p 1.51%
Flutter Entertainment (CDI) (FLTR) 10,480.00p 1.50%
Dechra Pharmaceuticals (DPH) 2,584.00p 1.49%
Convatec Group (CTEC) 211.00p 1.34%
Prudential (PRU) 939.00p 1.32%

FTSE 100 - Fallers

Kingfisher (KGF) 214.40p -4.92%
Centrica (CNA) 68.44p -4.44%
Rolls-Royce Holdings (RR.) 71.29p -3.56%
Smith (DS) (SMDS) 249.40p -3.52%
St James's Place (STJ) 995.60p -3.25%
Schroders (SDR) 382.50p -3.24%
Anglo American (AAL) 2,780.50p -3.12%
B&M European Value Retail S.A. (DI) (BME) 310.20p -2.91%
Shell (SHEL) 2,312.00p -2.80%
Next (NXT) 4,631.00p -2.75%

FTSE 250 - Risers

Volution Group (FAN) 324.50p 5.87%
CMC Markets (CMCX) 235.00p 5.62%
Chemring Group (CHG) 320.50p 5.43%
PureTech Health (PRTC) 256.00p 4.92%
ICG Enterprise Trust (ICGT) 1,084.00p 4.84%
Tritax Eurobox (GBP) (EBOX) 63.50p 4.79%
Plus500 Ltd (DI) (PLUS) 1,771.00p 4.12%
Hilton Food Group (HFG) 621.00p 4.02%
Darktrace (DARK) 315.40p 3.65%
Currys (CURY) 65.00p 3.59%

FTSE 250 - Fallers

Synthomer (SYNT) 103.60p -8.27%
Vistry Group (VTY) 579.00p -3.98%
Ferrexpo (FXPO) 126.70p -3.94%
Tullow Oil (TLW) 44.52p -3.55%
Apax Global Alpha Limited (APAX) 168.20p -2.89%
Drax Group (DRX) 542.50p -2.86%
NB Private Equity Partners Ltd. (NBPE) 1,575.00p -2.78%
Mitchells & Butlers (MAB) 109.40p -2.76%
TP Icap Group (TCAP) 198.90p -2.69%
Pennon Group (PNN) 778.50p -2.50%