London close: Stocks fall as UK service sector slows

London stocks ended the week on a negative note after data revealed an unexpected slowdown in the UK service sector's growth for June.

The FTSE 100 dropped 0.42%, closing at 8,237.72 points, while the FTSE 250 was off 0.27% at 20,442.35 points.

In currency markets, sterling was last down 0.15% on the dollar, trading at $1.2638, while it slipped 0.06% against the euro to change hands at $1.1820.

“Surprisingly strong UK retail sales weren't enough to keep the FTSE 100 in positive territory as weaker-than-expected French and German flash PMIs dragged European indices down,” said IG senior market analyst Axel Rudolph.

“Nonetheless, both the UK blue chip index and European indices managed to see their first weekly gain after four-to-five consecutive weeks of losses.”

Rudolph said the oil price had little changed on the day, but still saw its second straight week of gains of over 10% from its early June low.

“A stronger US dollar puts pressure on precious metals with the gold price dropping by over 1% and the silver price by over 3%.”

UK private sector growth unexpectedly slows

In economic news, the UK private sector's growth unexpectedly slowed in June, according to a survey by S&P Global.

The UK manufacturing output index hit a 26-month high at 54.2, while the manufacturing PMI rose to 51.4, surpassing forecasts.

Conversely, the UK services PMI business activity index fell sharply to a seven-month low of 51.2 from 52.9 in May.

The decline was attributed to businesses delaying spending decisions due to election uncertainty, leading the composite output index to drop from 53.0 to 51.7, against expectations of stability.

“Flash PMI data for June signal a slowing in the pace of economic growth, indicating that GDP is now growing at a sluggish quarterly rate of just over 0.1%,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“The slowdown in part reflects uncertainty around the business environment in the lead up to the general election, with many firms seeing a hiatus in decision making pending clarity on various policies.”

UK retail sales meanwhile exceeded expectations in May, according to the Office for National Statistics.

Sales rose by 2.9%, following a revised 1.8% decline in April.

The recovery was broad-based, with notable gains in clothing, furniture, and sports equipment sales.

Improved weather and promotional activities boosted footfall and sales, resulting in a 1.3% year-on-year increase, though still 0.5% below pre-pandemic levels.

UK consumer confidence also saw a boost in June.

The GfK consumer confidence index increased to -14, up three points from May, driven by improved economic recovery prospects.

Confidence in the economic outlook for the next year notably rose by six points to -11.

“While June’s reading of -14 is the third month in a row that confidence has increased, the headline score remains negative owing to the difficulty so many have experienced, as the unrelenting cost of living crisis batters household budgets,” said Joe Staton, client strategy director at GfK.

“Nevertheless, consumer confidence continues its robust long-term upwards trend this month, and has recovered significantly since the record low of -49, in September 2022.

“Consumers like financial certainty, and this has to be the cornerstone if we are to see confidence to break out into positive territory.”

Public sector borrowing in the UK came in lower than government forecasts for May, although it remained the third highest on record for the month.

The ONS reported borrowing of £15.0bn, slightly under the £15.7bn forecast.

However, public sector net debt rose to 99.8% of GDP, a level not seen since 1961, indicating ongoing fiscal challenges.

In the eurozone, the economic recovery slowed in June due to manufacturing sector weaknesses.

The HCOB composite PMI output index fell to 50.8 from 52.2 in May, missing expectations of 52.5.

The services PMI declined to 52.6, while the manufacturing PMI dropped to a six-month low of 45.6.

Across the Atlantic, US existing home sales in May dipped by 0.7% month-on-month to an annual rate of 4.11 million, aligning with expectations.

Despite the decline in sales, home prices reached new record highs.

In Japan, consumer price growth accelerated to 2.8% in May, matching forecasts.

However, core inflation, excluding food costs, slowed more than expected, adding uncertainty to the country's interest rate outlook.

Britvic rallies, B&M falls after broker downgrade

On London’s equity markets, Ocado Group experienced a modest rise of 0.45%.

The gains came after the company’s shares dropped on Thursday following the announcement of a paused launch for partner Sobeys' customer fulfilment centre in Vancouver, and the termination of their mutual exclusivity terms.

United Utilities Group and Severn Trent saw gains of 1.62% and 0.94%, respectively.

Both utilities companies benefited from JPMorgan Cazenove’s upgrades, which cited that their current share prices already factored in regulatory headwinds and less attractive proposed returns compared to electricity networks.

Compass Group also saw a 0.94% increase, after it announced it would buy up to $250m of its ordinary shares as part of the final phase of a $500m share repurchase programme initiated last November.

Informa remained mostly unchanged with a slight gain of 0.02%.

The events group had initially seen stronger gains after reporting it was on track to deliver earnings at the upper end of guidance with a 10.1% revenue growth year-to-date.

Britvic surged by 7.78% after rejecting two takeover proposals from Danish brewer Carlsberg, at 1,200p and 1,250p per share, respectively.

On the downside, B&M European Value Retail fell by 1.7% following a downgrade to ‘underweight’ by Morgan Stanley.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,237.72 -0.42%
FTSE 250 (MCX) 20,442.35 -0.27%
techMARK (TASX) 4,821.40 -0.02%

FTSE 100 - Risers

Phoenix Group Holdings (PHNX) 516.00p 4.16%
Flutter Entertainment (DI) (FLTR) 15,065.00p 2.31%
United Utilities Group (UU.) 1,009.50p 1.62%
Haleon (HLN) 334.00p 1.46%
Burberry Group (BRBY) 985.00p 1.32%
British American Tobacco (BATS) 2,488.00p 1.14%
Severn Trent (SVT) 2,464.00p 0.94%
Compass Group (CPG) 2,259.00p 0.94%
RS Group (RS1) 741.50p 0.88%
Smith & Nephew (SN.) 1,005.00p 0.60%

FTSE 100 - Fallers

Antofagasta (ANTO) 2,058.00p -4.10%
Convatec Group (CTEC) 237.20p -2.55%
Smurfit Kappa Group (CDI) (SKG) 3,658.00p -2.14%
Glencore (GLEN) 454.70p -1.99%
Pershing Square Holdings Ltd NPV (PSH) 4,226.00p -1.95%
HSBC Holdings (HSBA) 683.70p -1.91%
Rolls-Royce Holdings (RR.) 476.50p -1.85%
NATWEST GROUP (NWG) 314.70p -1.81%
DCC (CDI) (DCC) 5,595.00p -1.76%
Marks & Spencer Group (MKS) 298.00p -1.75%

FTSE 250 - Risers

Britvic (BVIC) 1,109.00p 9.26%
Foresight Group Holdings Limited NPV (FSG) 498.00p 5.06%
ITV (ITV) 80.30p 4.69%
Barr (A.G.) (BAG) 621.00p 4.19%
RHI Magnesita N.V. (DI) (RHIM) 3,390.00p 3.20%
TBC Bank Group (TBCG) 2,565.00p 2.81%
Trainline (TRN) 326.60p 2.45%
Mitchells & Butlers (MAB) 301.00p 2.38%
Indivior (INDV) 1,315.00p 2.33%
Abrdn (ABDN) 151.45p 2.19%

FTSE 250 - Fallers

Dr. Martens (DOCS) 78.35p -5.15%
Wizz Air Holdings (WIZZ) 2,218.00p -4.89%
W.A.G Payment Solutions (WPS) 62.80p -4.85%
Diversified Energy Company (DEC) 1,075.00p -4.44%
TUI AG Reg Shs (DI) (TUI) 563.50p -3.51%
Playtech (PTEC) 455.50p -3.39%
Ibstock (IBST) 154.20p -3.38%
Energean (ENOG) 1,040.00p -3.08%
Close Brothers Group (CBG) 438.20p -3.05%
PZ Cussons (PZC) 100.80p -2.89%