London close: Stocks fall as traders return from bank holiday

London stocks finished lower on Tuesday as investors resumed trading after the bank holiday and looked ahead to the US non-farm payrolls report due at the end of the week.

Joshua Mahony, market analyst at IG, said: “Much like last week, which saw traders spend their time anticipating Friday’s speech from Yellen, this week will also see a crescendo of anticipation into the August payrolls figure, which according to Stanley Fischer represents a deal breaker regarding whether the Fed will indeed raise rates in 2016.

“Following relatively robust numbers in the past two months, another 200K-plus figure could provide the spark needed for the committee to act this year, with markets currently pricing in a 61.4% chance. Given the threat associated with the US election in November, the likelihood is that December provides the best chance for action from the Fed.”

In her speech at the Jackson Hole symposium last Friday, Fed Chair Janet Yellen noted that the US economy is improving and suggested the case for a move on rates had strengthened in recent months.

On Tuesday’s agenda, data from the Bank of England revealed mortgage approvals in July fell to the lowest level since January 2015. Mortgage approvals dropped to 60,912 last month from 64,152 in June, missing analysts' expectations of 62,000.

Net consumer credit rose £1.18bn in July, compared to £1.85bn growth in June and forecasts for a £1.7bn increase.

“Looking ahead, the MPC’s easing measures in August have it cheaper for firms to raise funds from bond markets and will help to prevent interest rates on new bank loans from rising,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“But with huge uncertainty regarding the trade and regulatory environment for businesses post-Brexit unlikely to disappear soon, slightly cheaper borrowing costs will do little to prop up business investment over the coming quarters.”

Meanwhile, the European Commission said its economic sentiment indicator for the eurozone fell to 103.5 in August from 104.5 in July, worse than estimates of 104.1.

The UK’s economic confidence index rose to 104.0 in August from 102.6 in July, but remained well below the levels seen in the months leading up to the June 23 EU referendum.

Elsewhere, a report showed US house price growth slowed in June. The S&P Core Logic Case-Shiller 20-City Composite index rose 5.1% year-on-year, compared to expectations for an increase of 5.2% and May's revised 5.3% increase.

Separately, a gauge of US consumer confidence rose to the highest level in nearly a year in August. The Conference Board’s consumer confidence index edged up to 101.1 in August from 96.7 in July, beating estimates of 97.0.

“On the whole, the US consumer has remained a robust proposition within an international context of weakening demand, and the positive data may put the long-speculated interest rate hike further up Yellen’s agenda,” said Dennis de Jong, managing director of UFX.com.

“The real test, however, is whether this confidence begins to waver as we enter what will surely be the most contentious US presidential race in living memory.”

On the company front, Associated British Foods rallied after RBC Capital Markets upgraded the stock to ‘outperform’ from ‘sector perform’ and lifted the price target to 3,400p from 2,800p.

On the downside, Debenhams shares fell after RBC downgraded the retailer to ‘sector perform’ from ‘outperform’ with an unchanged target price of 65p.

Mining stocks were under the cosh as metal prices dropped with Antofagasta, Rio Tinto and Fresnillo among the biggest fallers.

Oil prices also fell as the dollar strengthened and as hopes faded on a deal at next month's unofficial OPEC meeting. Brent crude dropped 1.5% to $48.50 per barrel and West Texas Intermediate declined 1.2% to $46.41 per barrel at 1550 BST.

BHP Billiton suffered a double blow as it reported that a report it commissioned into the dam disaster at its Samarco joint venture in Brazil last year was due to a poorly designed structure that had allowed water to seep into its infrastructure and left sand inside the dam “loose, uncompacted and saturated”.

Shares in Emirates-based NMC Health jumped as the company said it was expanding into Saudi Arabia with the purchase of a 70% stake in a hospital for $45m and and investment in a long-term care facility.

Market Movers

FTSE 100 (UKX) 6,825.49 -0.18%
FTSE 250 (MCX) 17,830.50 -0.56%
techMARK (TASX) 3,467.50 -0.12%

FTSE 100 - Risers

Associated British Foods (ABF) 3,051.00p 3.42%
HSBC Holdings (HSBA) 557.50p 1.94%
Barclays (BARC) 169.15p 1.90%
Ashtead Group (AHT) 1,277.00p 1.75%
Royal Bank of Scotland Group (RBS) 200.10p 1.73%
Standard Chartered (STAN) 633.20p 1.65%
CRH (CRH) 2,582.00p 1.65%
Lloyds Banking Group (LLOY) 58.86p 1.47%
St James's Place (STJ) 975.00p 1.46%
Aviva (AV.) 424.50p 1.39%

FTSE 100 - Fallers

Fresnillo (FRES) 1,690.00p -5.59%
Antofagasta (ANTO) 511.50p -5.54%
Anglo American (AAL) 817.50p -4.78%
Rio Tinto (RIO) 2,350.50p -4.74%
Paddy Power Betfair (PPB) 9,200.00p -4.51%
Glencore (GLEN) 177.05p -4.30%
Randgold Resources Ltd. (RRS) 7,355.00p -4.17%
BHP Billiton (BLT) 1,040.50p -3.66%
Persimmon (PSN) 1,836.00p -2.50%
Berkeley Group Holdings (The) (BKG) 2,597.00p -2.37%

FTSE 250 - Risers

Circassia Pharmaceuticals (CIR) 96.20p 4.57%
Riverstone Energy Limited (RSE) 1,102.00p 2.89%
Wizz Air Holdings (WIZZ) 1,576.00p 2.67%
Big Yellow Group (BYG) 743.50p 2.48%
Ocado Group (OCDO) 306.00p 2.03%
IP Group (IPO) 193.60p 2.00%
Phoenix Group Holdings (DI) (PHNX) 859.00p 1.96%
Micro Focus International (MCRO) 2,033.00p 1.90%
Electra Private Equity (ELTA) 3,855.00p 1.69%
Dairy Crest Group (DCG) 668.00p 1.67%

FTSE 250 - Fallers

Acacia Mining (ACA) 476.00p -10.94%
Centamin (DI) (CEY) 154.40p -8.37%
Hochschild Mining (HOC) 254.80p -8.21%
Allied Minds (ALM) 348.30p -6.57%
Restaurant Group (RTN) 395.80p -6.21%
Kaz Minerals (KAZ) 174.20p -4.81%
Evraz (EVR) 131.90p -4.49%
Debenhams (DEB) 60.05p -4.38%
Vectura Group (VEC) 131.90p -4.07%
Aggreko (AGK) 1,024.00p -3.94%