London close: Stocks end tough week in the red

London stocks faced significant losses by the close of trading on Friday, as concerns over a number of macroeconomic factors weighed heavily on sentiment.

A looming crisis in the Chinese property market and a noticeable increase in US bond yields drove apprehensions of prolonged high interest rates, while a substantial decrease in UK retail sales further exacerbated the pessimistic outlook.

The FTSE 100 fell 0.65% to close at 7,262.43 points, while the FTSE 250 was down 1.41% to conclude the day at 18,096.60.

On the currency front, sterling was last down 0.08% on the dollar, trading at $1.2737, while it declined 0.1% against the euro to change hands at €1.1713.

“Global stock indices ended the week in the red as China's Evergrande Group filed for US bankruptcy protection as part of one of the world's biggest debt restructurings,” said IG senior market analyst Axel Rudolph.

“Growing anxiety over China's worsening property crisis also ended the seven-week bullish streak in the oil price as a weakening demand outlook led to its first weekly fall since mid-June.”

UK retail sales dip, eurozone inflation eases while Japan's remains steady

In economic news, July saw a 1.2% drop in UK retail sales compared to the prior month according to fresh data, with unfavourable weather conditions casting a shadow on what's typically a peak summer shopping period.

The decline contrasted with revised growth of 0.6% in June, where record temperatures had stimulated robust sales in the food and furniture sectors.

According to the Office for National Statistics, sales volumes in food stores for July plummeted by 2.6%.

Supermarkets reported a drop in clothing sales thanks to the rain, but the downturn was not limited to apparel.

Notably, the ongoing cost-of-living crisis and rising food prices seemed to play a substantial role in reduced food sales.

On an annual scale, sales experienced a decline of 3.2% - a significant deviation from June's 1.6% fall as well as the anticipated 2.1% decline.

Non-food stores didn't fare well either, recording a decrease of 1.7% in sales volumes.

Factors such as decreased foot traffic due to inclement weather contributed to the trend, with department stores and other shops bearing the brunt with a sharp 3.8% fall, largely attributed to reduced furniture and lighting products sales.

“Looking ahead, we continue to expect households’ real disposable income to rise briskly and to be about 2% higher in the fourth quarter than a year ago,” said Pantheon Macroeconomics chief UK economist Samuel Tombs.

“Month-to-month increases in wages will outpace price rises in the third and fourth quarters, as energy prices fall back and the rate of increase in both food and core goods prices slows, in line with producer prices.”

Meanwhile, in the eurozone there was a glimmer of optimism as inflationary pressures appeared to ease.

Data from Eurostat indicated a drop in consumer prices to 5.3% in July from 5.5% in June.

However, core inflation, which excludes fluctuating items such as food and energy, remained consistent at 5.5%.

A slight uptick in services inflation was seen, rising to 5.6% from the prior month's 5.4%.

Finally on data, Japan's inflation metrics presented a mixed bag, with the nation's core rate marginally decreasing to 3.1% in July from June’s 3.3%, matching forecasts.

However, the headline rate for the same month remained static at 3.3%.

The Bank of Japan's favoured ‘core-core’ inflation gauge, which further omits fresh food and energy prices, recorded a slight dip to 4.2% from June's 4.3%.

Sharp declines in some sectors, defensive stocks gain traction

On London’s equity market there was a downward shift in stocks sensitive to the Chinese economic landscape.

Major decliners included Antofagasta, Burberry Group, and Prudential, which faced significant pressures with drops of 3.16%, 1.65%, and 3.07% respectively.

In the retail sector, B&M European Value Retail pulled back 0.91%, having recently risen on speculation surrounding the potential acquisition of its collapsed competitor Wilko, which entered administration last week.

Bank of Georgia Group tumbled 6.19%, having surged on Thursday after announcing substantial half-yearly profits and a new stock buyback.

A subdued corporate news day adversely impacted shares in the consumer goods sector, with Grafton Group and Premier Foods experiencing declines of 2.98% and 2.49%, respectively.

The downward pressure on building materials supplier Grafton seemed to be the result of homeowners postponing property maintenance and upgrades.

Premier Foods meanwhile was challenged as consumers reduced their weekly spending, hinting at a potential trend of increased budget-consciousness among customers.

On the upside, defensive stocks displayed resilience and minor growth as investors veered towards sectors perceived as 'safe havens' during turbulent times.

That saw companies like British American Tobacco, Imperial Brands, SSE, National Grid, Phoenix Group Holdings and Aviva registering modest gains.

Notably, Aviva continued its upward trajectory with a 0.24% rise, following the company's interim results earlier in the week.

Further bolstering Aviva's stock value was a recommendation from broker Berenberg, which adjusted its target price for the company from 481p to a promising 493p, implying a substantial growth potential from its current position.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,262.43 -0.65%
FTSE 250 (MCX) 18,096.60 -1.41%
techMARK (TASX) 4,202.91 -0.59%

FTSE 100 - Risers

British American Tobacco (BATS) 2,525.00p 1.53%
Tesco (TSCO) 249.70p 1.30%
WPP (WPP) 744.60p 0.92%
BAE Systems (BA.) 963.40p 0.80%
Sage Group (SGE) 943.40p 0.53%
National Grid (NG.) 951.40p 0.53%
SSE (SSE) 1,585.50p 0.51%
Aviva (AV.) 382.80p 0.45%
Rentokil Initial (RTO) 587.20p 0.38%
Informa (INF) 706.20p 0.31%

FTSE 100 - Fallers

Airtel Africa (AAF) 108.70p -4.40%
RS Group (RS1) 696.60p -3.52%
Antofagasta (ANTO) 1,375.50p -3.30%
Prudential (PRU) 947.00p -3.19%
JD Sports Fashion (JD.) 149.70p -2.41%
Abrdn (ABDN) 161.90p -2.41%
Frasers Group (FRAS) 792.00p -2.40%
Hiscox Limited (DI) (HSX) 985.00p -2.09%
Weir Group (WEIR) 1,767.50p -2.00%
Ashtead Group (AHT) 5,328.00p -1.99%

FTSE 250 - Risers

UK Commercial Property Reit Limited (UKCM) 50.20p 1.52%
Pennon Group (PNN) 627.00p 0.64%
Watches of Switzerland Group (WOSG) 706.50p 0.64%
North Atlantic Smaller Companies Inv Trust (NAS) 3,570.00p 0.56%
Tate & Lyle (TATE) 706.00p 0.28%
SDCL Energy Efficiency Income Trust (SEIT) 71.80p 0.28%
Future (FUTR) 760.50p 0.20%
Balfour Beatty (BBY) 313.20p 0.19%
HICL Infrastructure (HICL) 121.80p 0.17%
Hilton Food Group (HFG) 675.00p 0.15%

FTSE 250 - Fallers

Bank of Georgia Group (BGEO) 3,400.00p -6.46%
Molten Ventures (GROW) 227.40p -5.33%
Vietnam Enterprise Investments (DI) (VEIL) 592.00p -4.52%
Syncona Limited NPV (SYNC) 138.00p -4.17%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 440.00p -4.16%
CLS Holdings (CLI) 125.80p -4.12%
Me Group International (MEGP) 154.40p -4.10%
Ibstock (IBST) 150.00p -3.85%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,270.00p -3.81%
Vanquis Banking Group 20 (VANQ) 108.80p -3.72%