London close: Stocks down on corporate earnings, Budget fallout

London stocks ended Thursday in negative territory, weighed down by corporate earnings releases and the market’s response to the new Labour government’s budget unveiled on Wednesday.

The FTSE 100 index fell 0.61% to 8,110.10 points, while the FTSE 250 dropped 1.47% to 20,388.96 points.

In currency markets, sterling was last down 0.73% on the dollar to trade at $1.2867, while it lost 0.77% against the euro, changing hands at €1.1848.

“Rising US, UK and European yields and disappointing earnings provoked a second straight day of losses for stock indices”, said IG senior analyst Axel Rudolph.

“Disappointing earnings by Meta, Microsoft and Starbucks amongst others led to a second straight day of losses with several major indices dropping between 1% and 2% ahead of Friday's US non-farm payrolls.

“The Fed's preferred PCE inflation gauge rose slightly, as expected, personal spending more-than-expected while jobless claims dropped to mid-May levels.”

Rudolph noted that on this side of the Atlantic, euro area inflation rose to 2%.

“The price of gold and silver suddenly reversed its recent trend with the precious metals falling by nearly 2% and 3.5% respectively.

“Meanwhile, the price of crude oil gained another percentage point amid reports of movements of ballistic missiles in Iran and increased fears of supply disruptions in case of the situation in the Middle East flaring up again.”

Eurozone inflation reaches ECB target, Bank of Japan holds rates

In economic news, eurozone inflation reached the European Central Bank’s target of 2% in October, marking a significant rebound from the previous month’s three-year low.

Eurostat said the harmonised index of consumer prices rose at an annual rate of 2.0%, up from September’s 1.7%, which was the weakest since April 2021.

The increase slightly surpassed market expectations, which had forecast a 1.9% rise.

According to Oxford Economics, the upside surprise likely “won't spook the ECB”.

“The slight uptick in eurozone inflation in October was expected following the base effect-driven dip in September,” said Oxford senior economist Rory Fennessy.

“Given weak underlying growth dynamics, we think inflation will undershoot ECB forecasts next year and allow for a sustained pace of rate cuts in the first half of 2025.”

In Germany, retail sales defied expectations by rising for a third consecutive month in September, according to the Federal Statistical Office.

Adjusted for inflation, sales climbed 1.2% over the month, mirroring August’s revised 1.2% increase and following a 1.5% rise in July.

Year-on-year, sales expanded by 3.8%, up from August’s 2.2% growth.

Notably, food sales saw a slight decline of 0.8%, while non-food retail gained 1.7%, and e-commerce and mail-order sales rose 3.1%.

Analysts had anticipated a 0.5% drop.

Earlier in the day, the Bank of Japan held its policy rate steady at 0.25%, as anticipated, following a general election outcome that left policy direction unchanged.

In its quarterly report, the BoJ reaffirmed its commitment to moderate rate hikes if economic recovery persists, noting that inflation is expected to remain close to its 2% target over the coming years.

The bank emphasised monitoring global economic trends, particularly in the US, to assess their potential impact on Japan’s economic outlook and inflation trajectory.

“The BoJ will prefer a wait-and-see approach ahead of the US presidential election next week and until the political situation after the ruling coalition lost its majority is more certain,” said analysts at Danske Bank.

“We expect another hike in December, particularly because the BoJ might see it as necessary to support the yen.

“With inflation on target and consumers' purchasing power heading slowly in the right direction, there is also an economically sound case for it, irrespective of the yen.”

Housebuilders face post-Budget blues, DS Smith surges

On London’s equity markets, housebuilders faced a challenging day, with Persimmon, Taylor Wimpey, Barratt Redrow, Vistry Group, and Bellway among the steepest decliners.

Persimmon led the fall, down 7.51%, while Bellway and Taylor Wimpey saw losses of 7.02% and 6.7%, respectively.

“Yesterday’s relief rally after the Budget didn’t last long,” said Russ Mould, investment director at AJ Bell.

“Gilt yields jumped after the market cottoned on to a big increase in government borrowing over the next five fiscal years and that extra tax income from changes announced in the Budget won’t appear overnight.

“That means interest rates could stay higher for longer which is not good for housebuilders and retailers hoping for reduced pressures on household finances, hence why those sectors were in the red today.”

Elsewhere, Smith & Nephew tumbled 12.48% after cutting its full-year sales forecast, citing weaker-than-expected demand in China.

IT services provider Kainos Group also dropped sharply, down 12.63%, after it announced that annual revenues would be “moderately below” market expectations due to delayed client decisions affecting its Digital Services and Workday Services divisions.

Spectris saw a 2.25% decline after projecting full-year adjusted operating profits of around £200m, missing market consensus, while Haleon edged down 0.27% following a 0.6% revenue dip in the third quarter.

Ocado Group slipped 0.47% after confirming that former Microsoft executive Adam Warby would replace outgoing chair Rick Haythornthwaite, effective 1 December.

On the upside, Coca-Cola HBC rose 1.57% after raising its full-year outlook following strong results over the first nine months.

Shell advanced 3.53% after third-quarter profits came in above analyst expectations, despite a decline due to softer oil prices.

DS Smith surged 14.26%, driven by merger partner International Paper's better-than-expected earnings report, which boosted confidence in the merger.

Sector peer Smurfit Westrock gained 6.25% in response.

In broker note action, Burberry Group climbed 3.05% after receiving an upgrade to ‘buy’ from HSBC.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,110.10 -0.61%
FTSE 250 (MCX) 20,388.96 -1.47%
techMARK (TASX) 4,608.51 -1.87%

FTSE 100 - Risers

Smith (DS) (SMDS) 545.50p 14.26%
Smurfit Westrock (DI) (SWR) 4,015.00p 6.25%
Shell (SHEL) 2,578.50p 3.53%
British American Tobacco (BATS) 2,695.00p 1.77%
Coca-Cola HBC AG (CDI) (CCH) 2,710.00p 1.57%
Imperial Brands (IMB) 2,337.00p 1.43%
Rentokil Initial (RTO) 387.50p 1.07%
HSBC Holdings (HSBA) 711.70p 0.78%
BP (BP.) 376.65p 0.70%
Sainsbury (J) (SBRY) 266.20p 0.68%

FTSE 100 - Fallers

Smith & Nephew (SN.) 961.00p -12.48%
Persimmon (PSN) 1,467.00p -7.47%
Taylor Wimpey (TW.) 146.30p -6.70%
Whitbread (WTB) 3,013.00p -5.10%
Barratt Redrow (BTRW) 446.40p -5.10%
Kingfisher (KGF) 292.50p -5.03%
Vistry Group (VTY) 914.50p -4.76%
Berkeley Group Holdings (The) (BKG) 4,426.00p -3.91%
Next (NXT) 9,790.00p -3.88%
Entain (ENT) 745.00p -3.85%

FTSE 250 - Risers

TBC Bank Group (TBCG) 2,750.00p 4.56%
W.A.G Payment Solutions (WPS) 80.40p 3.61%
Trainline (TRN) 389.20p 3.46%
PPHE Hotel Group Ltd (PPH) 1,250.00p 3.31%
Aston Martin Lagonda Global Holdings (AML) 114.40p 3.16%
Burberry Group (BRBY) 783.40p 3.05%
Carnival (CCL) 1,557.00p 2.17%
North Atlantic Smaller Companies Inv Trust (NAS) 3,790.00p 1.88%
Bank of Georgia Group (BGEO) 4,160.00p 1.84%
Investec (INVP) 594.50p 0.93%

FTSE 250 - Fallers

Kainos Group (KNOS) 747.00p -12.63%
Bellway (BWY) 2,836.00p -7.02%
PZ Cussons (PZC) 81.00p -6.03%
Workspace Group (WKP) 557.00p -5.91%
Crest Nicholson Holdings (CRST) 169.30p -5.84%
Watches of Switzerland Group (WOSG) 407.00p -5.70%
Shaftesbury Capital (SHC) 136.00p -5.56%
SThree (STEM) 353.50p -5.48%
4Imprint Group (FOUR) 5,110.00p -5.37%
Hammerson (HMSO) 287.40p -5.34%