London close: Stocks finish firmer as capital swelters

London stocks managed to close above the waterline on Tuesday, as London suffered in its hottest temperatures ever recorded, while investors digested the latest UK jobs data.

The FTSE 100 ended the session up 1.01% at 7,296.28, and the FTSE 250 was ahead 1.41% at 19,282.59.

Sterling was in a mixed state, last rising 0.55% on the dollar to $1.2019, while it weakened 0.38% against the euro to €1.1737, while the hottest temperature ever recorded in Britain was seen at Heathrow Airport earlier in the afternoon, of 40.2 degrees Celsius.

“Stock markets are enjoying a rally as traders have shrugged off concerns there might be an energy shortage in Europe,” said Equiti Capital market analyst David Madden.

“Yesterday, Gazprom said it might not be able to meet its obligations with respect to delivering gas to Europe.

“Possibly because there is a heatwave across Europe now, the prospect of a small gas shortage is not weighing on sentiment but come winter, it could be a different story.”

Madden noted that positive sentiment in the US was boosting European indices as well.

“Last night, the S&P 500 closed in the red as it was reported that Apple intends to slow its hiring process.

“The negative mood was short lived as the US index is up almost 1.9%, and it has recouped all of yesterday’s losses.”

In economic news, the latest data from the Office for National Statistics showed that employment picked up in the three months to May, but real pay fell at the fastest rate since records began.

Average total pay growth was 6.2%, down from 6.8% in April, while regular pay growth excluding bonuses was 4.3%, up a touch from 4.2%.

Adjusted for inflation, however, total pay fell by 0.9% and regular pay was down 2.8% - the biggest fall since records began in 2001.

The data also showed that the unemployment rate was steady at 3.8% in the three months to May.

Meanwhile, the number of people in employment rose by 296,000.

That was well ahead of consensus expectations of 170,000 and marked the biggest jump since the three months to August 2021.

“Following recent increases in inflation, pay is now clearly falling in real terms both including and excluding bonuses,” said David Freeman, head of labour market and household statistics at the ONS.

“Excluding bonuses, real pay is now dropping faster than at any time since records began in 2001.”

Elsewhere, industry data showed grocery inflation rocketing to nearly 10%, as supply chain pressures continued to drive up prices.

According to Kantar, like-for-like grocery price inflation hit 9.9% over the past four weeks, up 1.6 percentage points on last month and the second-highest reading since the retail consultancy started tracking prices in 2008.

In the 12 weeks to 10 July, grocery inflation was 8.1% year-on-year, with prices rising fastest in butter, milk and dog food.

As a result, shoppers were now facing a £454 increase to annual grocery bills.

Fraser McKevitt, head of retail and consumer insight at Kantar, said shoppers would be "feeling the pinch" during the first restriction-free summer since 2019, and were increasingly turning to own-brand products as a result.

Supermarket own-line labels grew 4.1% over the period, while branded items fell by 2.4%.

"It is a complex picture and the grocers are busy negotiating with their suppliers to mitigate impact at the tills as far as possible," McKevitt added.

Across the channel, official data showed eurozone inflation pushing higher in June, as soaring energy prices weighed heavily.

According to final estimates from Eurostat, annual inflation was 8.6% last month, up from 8.1% in May and in line with consensus.

Core inflation, which strips out more volatile elements, eased 0.1 percentage points to 3.7%, also in line with forecasts.

In the wider bloc, annual inflation was 9.6%, compared to 8.8% a month previously.

That led to chatter that European Central Bank policymakers would be discussing whether to raise interest rates by a bigger-than-expected 50 basis points at their meeting on Thursday to tackle the record-high inflation.

Reuters cited sources as saying that policymakers were also honing in on a deal to provide help for indebted countries like Italy on the bond market - provided they stick to European Commission rules on reforms and budget discipline.

It was understood the discussion about whether to hike rates by 25 or 50 basis points was still wide open.

Still on data and turning stateside, housebuilding activity in the US slowed sharply last month.

According to the US Department of Commerce, housing starts slipped by a seasonally-adjusted 2.0% month-on-month to reach an annualised rate of 1.559 million, against consensus expectations for 1.59 million.

That put them 6.3% below the levels announced a year earlier.

On London’s equity markets, Informa rallied 5.44% after it backed its full-year expectations, hailed strong first-half revenues and announced the acquisition of US-based Industry Dive for $389m.

Promotional products pusher 4imprint surged 18.85% after it said 2022 operating profit was set to be "materially" above consensus analyst forecast, and not less than $75m.

Darktrace was also in the black, rising 4.38% after it said full-year core earnings margins were set to be above expectations, as customer numbers increased.

Aerospace, defence, and security giant Babcock International rose 3.7% after it agreed to sell certain aerial emergency services businesses to funds managed by mid-market infrastructure investor Ancala Partners for €136.2m.

Polymetal rocketed 32.08% after saying it was considering disposing of its Russian assets.

On the downside, IntegraFin lost 2.57% after the Transact owner reported a dip in third-quarter net inflows.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,296.28 1.01%
FTSE 250 (MCX) 19,282.59 1.41%
techMARK (TASX) 4,345.95 0.73%

FTSE 100 - Risers

Informa (INF) 568.60p 5.88%
Burberry Group (BRBY) 1,719.50p 4.62%
JD Sports Fashion (JD.) 137.50p 4.17%
B&M European Value Retail S.A. (DI) (BME) 410.00p 4.06%
Harbour Energy (HBR) 349.70p 3.37%
Smurfit Kappa Group (CDI) (SKG) 2,877.00p 3.34%
NATWEST GROUP PLC ORD 100P (NWG) 228.10p 3.21%
Standard Chartered (STAN) 583.80p 3.14%
Lloyds Banking Group (LLOY) 44.07p 3.02%
WPP (WPP) 835.20p 2.98%

FTSE 100 - Fallers

GSK (GSK) 1,775.20p -18.25%
Ocado Group (OCDO) 749.60p -3.87%
Aveva Group (AVV) 2,244.00p -2.22%
Endeavour Mining (EDV) 1,618.00p -0.68%
Sage Group (SGE) 676.40p -0.47%
SSE (SSE) 1,787.00p -0.45%
Admiral Group (ADM) 1,731.00p -0.40%
Shell (SHEL) 2,034.00p -0.15%
Glencore (GLEN) 419.45p -0.08%
Flutter Entertainment (CDI) (FLTR) 7,866.00p -0.08%

FTSE 250 - Risers

Polymetal International (POLY) 238.00p 33.71%
4Imprint Group (FOUR) 2,900.00p 18.85%
Baltic Classifieds Group (BCG) 144.60p 8.72%
TI Fluid Systems (TIFS) 162.80p 7.11%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,115.00p 5.75%
ICG Enterprise Trust (ICGT) 1,120.00p 5.46%
Coats Group (COA) 66.80p 5.20%
Ferrexpo (FXPO) 122.50p 5.15%
Premier Foods (PFD) 110.60p 5.13%
WH Smith (SMWH) 1,471.50p 4.88%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 535.00p -12.12%
IntegraFin Holding (IHP) 243.20p -2.33%
Trainline (TRN) 374.70p -2.19%
Molten Ventures (GROW) 423.20p -2.17%
Chrysalis Investments Limited NPV (CHRY) 95.80p -1.94%
Liontrust Asset Management (LIO) 889.00p -1.66%
CLS Holdings (CLI) 202.00p -1.22%
Biffa (BIFF) 361.00p -1.04%
Telecom Plus (TEP) 2,120.00p -0.93%
Worldwide Healthcare Trust (WWH) 3,295.00p -0.90%