London close: Stocks fall, gas prices surge on icy Monday
London stocks remained below the waterline by the close on Monday, as investors digested the latest UK GDP data on a chilly day in the UK, and looked ahead to a week filled with key central bank announcements.
The FTSE 100 ended the session down 0.41% at 7,445.97, and the FTSE 250 was off 0.51% at 18,819.44.
Sterling was in the green, meanwhile, and was last up 0.18% on the dollar at $1.2281, as it strengthened 0.07% against the euro to trade at €1.1649.
“London finds itself under a blanket of snow today, with markets reacting in the form of a sharp spike in natural gas prices,” said IG senior market analyst Joshua Mahony.
“The relatively moderate temperatures thus far had eased concerns over gas storage levels, but hopes that demand could be curtailed have been dented by this latest wave of cold weather in Western Europe.”
Mahony said that for markets, the recent optimism seen in recent months came off the back of deteriorating inflation data.
“With that in mind, any surge in energy prices does provide a significant risk of a second surge in prices that could undermine equity markets.”
On the macro front, the UK economy returned to growth in October according to official figures released earlier, although the country was still heading for recession.
The economy grew 0.5% in October following a 0.6% contraction in September, when it took a hit from the funeral of Queen Elizabeth, according to the Office for National Statistics.
That was a touch ahead of economists' expectations for 0.4% growth.
In the three months to October, however, the economy shrank by 0.3%, versus expectations of a 0.4% contraction.
That marked the biggest decline since early 2021.
“While today's figures show some growth, I want to be honest that there is a tough road ahead,” said Chancellor Jeremy Hunt.
“Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin's war and high global gas prices.
“Our plan has restored economic stability and will help drive down inflation next year, but also lay the foundations for long-term growth through continued record investment in new infrastructure, science and innovation.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the monthly rise in GDP was likely to have been more of a temporary upswing rather than the start of a more positive chapter for the economy.
"A rebound in services largely accounted for the lift, after many companies scaled back promotional events, and workers had a bank holiday for the monarch's funeral in September,” she noted.
“However, production remains flat and while construction grew by 1.1%, more recent data indicates that sentiment in the building sector soured in November.”
Elsewhere, UK house prices had fallen 2.1% to £359,137 so far in December, as most Britons held out hope for a calmer property market in 2023.
According to property marketing platform Rightmove, the average price of a house coming to market dropped £7,862 in the month to-date - a larger than usual decline for the time of year, as determined sellers priced aggressively in a bid to tempt hesitant buyers.
Rightmove said that 2022 would now end with new seller asking prices up 5.6% year-on-year, versus 6.3% annual growth in 2021, but also said it believed prices would drop by an overall average of 2% in 2023 as a "multi-speed hyper-local market" emerged.
“As mortgage rates settle down, buyer demand over the past two weeks is 4% up on the same period in 2019,” Rightmove said.
“We predict that the market will settle into a more normal pre-pandemic level of activity as 2023 progresses.
“Though we would always expect prices to drop in December, as motivated sellers try to capture the attention of a buyer before Christmas with a competitive price, this monthly dip is the largest we've seen for four years.”
UK manufacturing output was meanwhile expected to tumble according to an industry survey, after the sector was rocked by higher costs and weakening consumer demand.
The latest quarterly Make UK-BDO manufacturing outlook survey showed that output was set to fall 4.4% in 2022, before contracting by 3.2% in 2023.
Make UK acknowledged that 2022 was being compared to a "very strong" 2021, when the sector benefited from what it called a "pandemic bounce-back".
But it was also a significant downward revision on the last forecast made in September, for growth of 0.6% 2022.
Investment intentions also turned negative for the first time in seven quarters, falling to a balance of -5% from 7% in the third quarter.
“Manufacturing input prices are growing so rapidly - it is little wonder UK manufacturers are having to pass the costs onto their customers to remain viable,” said Richard Austin, national head of manufacturing at BDO.
“The true impact of inflationary pressures and dwindling investment may not be immediately apparent in the sector, but they will be reflected in longer-term growth.”
Finally on the economic front, National Grid ordered two coal-fired generators be readied for use as temperatures continued to linger around the freezing point across the UK.
The electricity system operator said that two "winter contingency coal units" in Yorkshire, owned by Drax, would be available on Monday if needed.
It said the move was intended to ensure continuity of supply, and prevent any possible blackouts.
Temperatures across the UK plunged over the weekend, bringing snow overnight on Sunday for large parts of the country as well as freezing fog and ice.
Met Office weather warnings remained in place for much of the UK on Monday.
On London’s equity markets, precious metals miner Fresnillo lost 3.23% and online grocer and warehouse technology developer Ocado Group was 2.45% weaker.
International Distribution Services fell 3.9% after a downgrade to ‘hold’ at HSBC, and as strikes at its Royal Mail operation took their toll.
Online fashion retailer Asos plunged 7.35% after reports it was in talks with lenders about hiring a restructuring expert, following the departure of its chief financial officer.
Frasers Group was in the red by 3.77%, after Mike Ashley sold put options on more than 200,000 shares in the company.
The retail conglomerate said Ashley sold the options with an expiry of September 2023 and a strike price of 900p, giving them an aggregated price of £1.8m.
Home REIT plummeted 17.24% after it said it was carrying out “enhanced” audit procedures, including a detailed review of the allegations made against the company and its advisers by short sellers.
The company said earlier that it was continuing to "work constructively" with its auditor to ensure that the full-year results for the 12 months ended 31 August could be published as soon as possible, adding that it expected that to be no later than the end of January.
On the upside, London Stock Exchange Group jumped 2.97% after Microsoft agreed to buy a 4% stake in the company as part of 10-year strategic partnership for next-generation data and analytics and cloud infrastructure solutions.
John Wood Group rallied 5.52% after an upgrade to ‘buy’ from ‘hold’ at Jefferies, which cited an improved medium-term cashflow outlook.
Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert and Abigail Townsend.
Market Movers
FTSE 100 (UKX) 7,445.97 -0.41%
FTSE 250 (MCX) 18,819.44 -0.51%
techMARK (TASX) 4,400.20 0.06%
FTSE 100 - Risers
London Stock Exchange Group (LSEG) 7,650.00p 2.97%
Dechra Pharmaceuticals (DPH) 2,758.00p 1.47%
Harbour Energy (HBR) 306.40p 1.42%
Experian (EXPN) 2,924.00p 1.00%
Haleon (HLN) 317.60p 0.95%
Sage Group (SGE) 784.40p 0.72%
Entain (ENT) 1,409.50p 0.71%
Standard Chartered (STAN) 603.00p 0.67%
BAE Systems (BA.) 831.00p 0.65%
Smith & Nephew (SN.) 1,105.00p 0.64%
FTSE 100 - Fallers
Frasers Group (FRAS) 753.00p -3.77%
Fresnillo (FRES) 845.80p -3.23%
Endeavour Mining (EDV) 1,672.00p -3.02%
Prudential (PRU) 1,061.00p -2.71%
Rio Tinto (RIO) 5,679.00p -2.67%
Kingfisher (KGF) 235.30p -2.61%
Ocado Group (OCDO) 669.40p -2.45%
Mondi (MNDI) 1,452.00p -2.39%
Persimmon (PSN) 1,253.00p -2.34%
Antofagasta (ANTO) 1,425.00p -2.20%
FTSE 250 - Risers
Volution Group (FAN) 383.00p 8.19%
Wood Group (John) (WG.) 134.20p 5.52%
Helios Towers (HTWS) 115.60p 3.40%
Drax Group (DRX) 619.50p 2.57%
Energean (ENOG) 1,291.00p 2.54%
FDM Group (Holdings) (FDM) 762.00p 2.14%
Hilton Food Group (HFG) 529.00p 1.93%
3i Infrastructure (3IN) 326.50p 1.87%
Lancashire Holdings Limited (LRE) 615.00p 1.82%
Mitie Group (MTO) 73.30p 1.81%
FTSE 250 - Fallers
Home Reit (HOME) 38.40p -17.24%
ASOS (ASC) 542.00p -7.35%
Mitchells & Butlers (MAB) 128.10p -6.63%
Currys (CURY) 66.15p -5.50%
888 Holdings (DI) (888) 91.05p -5.21%
Synthomer (SYNT) 117.50p -4.55%
Aston Martin Lagonda Global Holdings (AML) 153.20p -4.52%
Hammerson (HMSO) 22.87p -4.03%
International Distributions Services (IDS) 204.30p -3.90%
Wizz Air Holdings (WIZZ) 2,410.00p -3.44%