London close: Stocks fall on fresh service sector data

London stock markets ended lower on Wednesday, as investors cautiously responded to fresh services data from the UK and China, and looked to the latest Federal Reserve minutes.

The FTSE 100 slid 1.03% to settle at 7,442.10, while the FTSE 250 saw a decrease of 0.76% to close at 18,393.33.

On the currency front, sterling was last down 0.05% on the dollar to last trade at $1.2707, while it strengthened 0.11% on the euro to change hands at €1.1699.

“The optimism seen on Friday is now a distant memory, and stocks continue to lose ground following the return of US markets from their holiday,” said IG chief market analyst Chris Beauchamp.

“As we enter the summer period, it seems volatility will increase and the price action will become much more two-way, especially when earnings season begins next week.

“Fears persist that tonight’s Fed minutes will paint a more hawkish picture too, boosting the dollar and weakening stocks yet further.”

UK service sector growth decelerates; China's post-pandemic recovery slows

In economic news, the UK service sector's recovery showed signs of deceleration in June as rising interest rates began to impact demand, according to a report from S&P Global/CIPS UK.

The services PMI business activity index was 53.7, a decline from May's 55.2 but in alignment with predictions and preliminary estimates.

A score above 50 denotes expansion, whereas below suggests contraction.

Despite the slowdown, the survey revealed that staffing levels continued their upward trajectory, hitting a nine-month high.

Simultaneously, the input cost inflation dropped to its lowest level since May 2021.

However, growth in new work volumes was reported to be at its slowest since the start of the expansion period in February.

Although business and consumer spending appeared resilient, real estate and construction sectors experienced reduced demand due to increasing interest rates.

The combined PMI, encapsulating services and manufacturing indices, declined from 54.0 in May to 52.8 in June, matching forecasts.

“The service sector showed renewed signs of fragility in June, as rising interest rates and concerns about the UK economic outlook took their toll on customer demand,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Business activity increased at the slowest pace for three months, while the rate of new order growth eased further from April’s recent peak.”

Elsewhere, UK new car sales experienced a significant increase of 25.8% year-on-year in June.

The surge was largely driven by a robust demand for electric vehicles (EVs) from businesses and fleet buyers, as disclosed by the Society of Motor Manufacturers and Traders (SMMT).

New car sales reached 177,266 units in June, marking the 11th consecutive month of growth, although volumes still lagged behind the pre-pandemic levels of 2019.

Meanwhile, China's economic recovery following the Covid-19 pandemic also showed signs of a slowdown.

According to a survey by Caixin/S&P Global, the services activity in June expanded at its slowest rate in five months.

The services PMI dropped to 53.9 from 57.1 in May, marking the lowest score since January.

Including both manufacturing and services activities, the composite PMI dipped from 55.6 in May to 52.5 in June, indicating an overall decrease in expansion.

Redde Northgate and SIG fall; Keller Group and Pearson shine

On London’s equity markets, Redde Northgate, the vehicle hire company, saw its shares drop by 6.35% today despite a strong earnings report.

The company demonstrated a robust 34.7% increase in pre-tax profits to £178.7m, and growth in revenue to £1.49bn.

In addition, the full-year dividend was raised by 3p to 24p per share.

Outside of the FTSE 350, SIG saw a sharp decrease of 14.2% in its stock value after the firm announced its full-year operating profit was likely to be at the lower end of market expectations.

In the retail sector, Quiz's shares dropped by 11.74% today.

Despite the fashion retailer reporting a rise in full-year profit and revenue, the company alluded to "tough" trading conditions in the early months of the new fiscal year.

On the upside, Keller Group shares surged by 11.22% after the company revised its full-year earnings outlook upward.

The positive revision was based on strong trading in the first half of the year and a "robust" order book, instilling confidence among investors.

Finally, Pearson emerged as a standout performer, with shares increasing by 2.45%.

The uptick came after UBS upgraded Pearson's shares from 'neutral' to 'buy', justifying the move by stating that Pearson's assessment and qualifications segment has significant potential to exceed growth expectations.

Furthermore, the brokerage noted the potential for additional upside if Pearson can secure more contracts in the US student assessment market or if its Edexcel division expands beyond the UK.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,442.10 -1.03%
FTSE 250 (MCX) 18,393.33 -0.76%
techMARK (TASX) 4,385.64 -0.65%

FTSE 100 - Risers

Pearson (PSON) 837.40p 2.45%
Tesco (TSCO) 248.80p 0.40%
Convatec Group (CTEC) 203.80p 0.39%
AstraZeneca (AZN) 10,620.00p 0.38%
BAE Systems (BA.) 910.80p 0.20%
B&M European Value Retail S.A. (DI) (BME) 544.00p 0.18%
Sainsbury (J) (SBRY) 270.00p 0.15%
Land Securities Group (LAND) 597.60p 0.10%
Reckitt Benckiser Group (RKT) 5,904.00p 0.00%
Lloyds Banking Group (LLOY) 43.83p -0.11%

FTSE 100 - Fallers

Ocado Group (OCDO) 573.40p -6.79%
Prudential (PRU) 1,063.00p -3.89%
Severn Trent (SVT) 2,450.00p -3.51%
United Utilities Group (UU.) 934.60p -3.02%
M&G (MNG) 187.90p -2.92%
SSE (SSE) 1,789.50p -2.80%
Anglo American (AAL) 2,268.50p -2.72%
Ashtead Group (AHT) 5,228.00p -2.54%
RS Group (RS1) 744.00p -2.26%
BP (BP.) 459.80p -2.22%

FTSE 250 - Risers

Keller Group (KLR) 783.00p 11.22%
C&C Group (CDI) (CCR) 131.80p 1.70%
Molten Ventures (GROW) 266.00p 1.60%
Premier Foods (PFD) 130.00p 1.56%
Great Portland Estates (GPE) 433.20p 1.55%
Workspace Group (WKP) 495.00p 1.52%
CLS Holdings (CLI) 141.60p 1.43%
International Public Partnerships Ltd. (INPP) 129.60p 1.25%
Mitie Group (MTO) 97.90p 1.24%
The Renewables Infrastructure Group Limited (TRIG) 117.20p 1.03%

FTSE 250 - Fallers

Redde Northgate (REDD) 354.00p -6.35%
Jupiter Fund Management (JUP) 102.10p -5.81%
Elementis (ELM) 102.20p -4.84%
Watches of Switzerland Group (WOSG) 616.00p -4.50%
Petershill Partners (PHLL) 164.00p -3.87%
International Distributions Services (IDS) 223.30p -3.47%
IP Group (IPO) 53.70p -3.24%
Baltic Classifieds Group (BCG) 190.00p -3.16%
Savills (SVS) 830.50p -3.04%
Wizz Air Holdings (WIZZ) 2,776.00p -2.94%