London close: Stocks fall on day of global IT chaos

London's stock markets closed in the red on Friday, affected by a significant global IT outage and a drop in UK retail sales.

The FTSE 100 fell 0.6% to close at 8,155.72 points, while the FTSE 250 index also saw a decline, dropping by 0.78% to finish at 21,067.68 points.

In currency markets, sterling was last down 0.19% on the dollar, trading at $1.2920, while it decreased 0.1% against the euro to change hands at €1.1867.

“Worse-than-expected UK retail sales and a global Microsoft Windows outage, allegedly caused by an update from CrowdStrike, led to another negative session in global stock markets,” said IG senior market analyst Axel Rudolph.

“The FTSE 100 saw a second straight day of losses and the German DAX 40 index its fifth, both ending the week in the red as the European central bank kept rates on hold.”

Rudolph noted that next week US earnings, especially in the recently battered tech sector, would be watched closely ahead of Friday's Federal Reserve-preferred PCE inflation gauge.

“The gold price is on track for its third straight day of losses from this week's record high as the US dollar appreciates on safe-haven flows due to a global IT outage which affected banks, hospitals, international airports and grounded airlines.”

Global IT outage wreaks havoc on world infrastructure

A software update from cybersecurity firm CrowdStrike caused widespread disruption across multiple sectors globally throughout the day.

The update led to system crashes at airlines, banks, hospitals, media outlets, and retailers.

CrowdStrike's CEO, George Kurtz, apologised for the incident, clarifying that the issue was caused by a defect in a content update for Windows hosts, and emphasised that Mac and Linux hosts were unaffected.

He assured that the issue had been identified, isolated, and a fix deployed.

The impact was severe, with reports indicating that each affected terminal would need to be restarted individually in "safe mode" to install the fix.

The problems began on Thursday when Microsoft investigated issues with its cloud services in the central United States, which led to flight cancellations.

By Friday morning, the disruption had spread globally, affecting nearly 1,500 flights by 1500 BST.

Major US airlines, including United, Delta, and American Airlines, temporarily grounded flights.

European carriers like Air France-KLM's KLM and Lufthansa's Swiss also faced significant operational challenges.

In the UK, the busiest travel day since the pre-Covid era was marred by chaos, with passengers stranded for hours.

The UK's rail network also experienced widespread issues, with FirstGroup's South Western Railway reporting non-functional ticket vending machines.

Other European and Asian airports, including Berlin, Stansted, Schiphol, Mumbai, and Hong Kong, also reported significant technical problems.

Australia's state-owned broadcaster ABC, commercial channels 10 and Sky News, and telecoms giant Telstra were among those affected.

Retail sales fall more than expected in the UK

In economic news, UK retail sales dropped more than anticipated in June, according to the Office for National Statistics (ONS).

Sales volumes fell by 1.2%, following a 2.9% rise in May, surpassing analysts' expectations of a 0.4% decline.

The ONS reported declines across all main shop types, with department stores, furniture, and clothing shops seeing significant drops.

Over the second quarter, sales volumes decreased by 0.1%, and year-on-year by 0.2%, with the biggest falls in supermarkets and clothing stores partially offset by online shopping growth.

Sales volumes remained 1.3% below pre-pandemic levels.

“June has been a washout for retail sales, with retailers yet to sustain two consecutive months of sales growth this year,” said Erin Brookes, European retail and consumer lead at Alvarez & Marsal.

“The poor weather in June saw disappointing sales of summer goods across food and clothing.

“This comes despite significant discounting and deflation in fashion retail, with volumes remaining stagnant.”

Additionally, consumer confidence in the UK remained low in July, according to GfK's latest survey.

The consumer confidence index edged up by one point to -13.

While perceptions of personal finances over the past year improved slightly, expectations for the future declined.

Opinions on the economy remained unchanged, and the major purchase index saw a notable increase, rising seven points to -16.

“July’s score is structurally better than the -48 that immediately followed the Truss-Kwarteng show, but also shows that British consumers took the reasonably inevitable UK election results in their stride,” said Clive Black, head of consumer research at Shore Capital.

“With no new shocks or surprises, we remain cautiously optimistic about the second half, especially the potential for gradual improvement on discretionary consumer goods demand.”

Stocks mixed in low-information day for London market

On London’s equity markets, London Stock Exchange Group declined 0.76% after its Regulatory News Service experienced issues on Friday morning, as part of the global CrowdStrike failure.

Segro saw a more significant drop of 1.84% after the real estate investment trust announced the sale of a portfolio of logistics warehouses in Italy for €327m (£275m).

The portfolio, sold by the Segro European Logistics Partnership (SELP), consisted of four warehouses in Milan and Rome, with a total floor space of 338,745 square metres and generating a passing rent of €19m annually.

Segro holds a 50% interest in SELP, which owns €6.7bn of big-box warehouses and development land across seven European countries.

United Utilities Group fell 1.41% despite reporting a strong operational performance and affirming its financial guidance for 2024-2025.

The company said it was confident in achieving a four-star rating from the Environment Agency's annual environmental performance assessment (EPA) for 2023, with expectations of maintaining such a rating for 2024.

Pharmaceutical giant GSK edged down 0.49% after it announced that the European Medicines Agency (EMA) had accepted its marketing authorisation application for Blenrep, in combination with BorDex or PomDex, for treating relapsed or refractory multiple myeloma.

On the upside, Hargreaves Lansdown rose 0.36% after the fund supermarket confirmed an extension of the deadline for a potential £5.4bn takeover by a private equity consortium led by CVC Capital Partners to 5 August.

The FTSE 250 firm had indicated a willingness to recommend a 1,140p per share offer, after rejecting an earlier approach.

Virgin Money UK shares increased 0.28%, following an announcement that its acquisition by Nationwide Building Society had received unconditional approval from the Competition and Markets Authority (CMA).

The acquisition would see Nationwide purchasing the entire issued and to-be-issued share capital of Virgin Money through a scheme of arrangement.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,155.72 -0.60%
FTSE 250 (MCX) 21,067.68 -0.78%
techMARK (TASX) 4,765.65 -0.69%

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Premier Foods (PFD) 172.00p 1.18%
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TI Fluid Systems (TIFS) 133.00p -3.20%