London close: Stocks finish weaker as NatWest drags down peers

London stocks closed below the waterline on Friday after underwhelming results from across the pond overnight from Apple and Amazon, and as NatWest tumbled after its third-quarter numbers.

The FTSE 100 ended the session down 0.37% at 7,047.67, and the FTSE 250 was off 0.91% at 17,916.67.

Sterling was in the green, meanwhile, to last trade up 0.04% on the dollar at $1.1570, as it gained 0.35% against the euro to €1.1645.

“The dollar is ending the week with a modest recovery, after a pullback that pushed the greenback to a five-week low,” said IG chief market analyst Chris Beacuhamp.

“This week has seen the Bank of Canada, the European Central Bank and the Bank of Japan all dial back their hawkishness, leaving the Fed as almost one of the last major central banks still committed to push on with aggressive hikes.

“Combined with the better - or less gloomy - outlook for the US economy, it looks like traders have been given fresh reasons to buy back into the surging dollar.”

On the political front, prime minister Rishi Sunak was reported to be looking to build a buffer in the public finances as he drew up an economic plan to plug Britain’s budget shortfall, which could entail tax rises and spending cuts of up to £50bn.

Bloomberg earlier cited an official “familiar with the matter” as saying that Sunak and chancellor Jeremy Hunt wanted the extra headroom over and above the UK’s £35bn fiscal hole, so that the package could land credibility with the markets.

Another source told Bloomberg that could entail spending cuts and tax rises closer to £50bn - a figure widely reported in the media earlier.

Sunak, who became PM earlier in the week, was trying to restore calm to the financial markets after his predecessor, Liz Truss, sparked turmoil during her seven-week tenure with a massive package of unfunded tax cuts that tanked the pound and gilt markets.

On Wednesday, it emerged that Sunak and Hunt had pushed back a planned economic statement from 31 October to 17 November to give them more time to make what the PM described as the "right decisions" to manage the British economy.

In economic news, vacancy rates for retail spaces in Britain improved further in the third quarter according to fresh industry data, although they still remained above pre-pandemic levels.

The BRC-LDC vacancy monitor showed the overall vacancy rate decreased to 13.9%, which was 0.1 percentage points better than the second quarter, and 0.6 points better than the same period last year.

It was also the fourth consecutive quarter of falling vacancy rates.

The data showed all locations seeing improvements in vacancy rates in the third quarter, with shopping centre vacancies falling to 18.8% from 18.9% in the second quarter.

High street vacancies decreased to 13.9% from 14%, and retail park vacancies decreased to 9.7%, which was a 0.5 percentage point improvement from the prior three months.

“The overall shop vacancy rate improved for the fourth consecutive quarter; however, vacancies remain higher than pre-pandemic levels,” said Helen Dickinson, chief executive officer of the British Retail Consortium.

“Some locations are benefitting from a pickup in tourism and a gradual return to offices, but levels of footfall are still below those of 2019.

“This gave some businesses the confidence to start investing, opening new stores around the country, especially in retail parks.”

On the continent, the euro area's largest economy defied market expectations for a contraction over the three months to September thanks to private consumption.

According to Destatis, German gross domestic product expanded at a quarter-on-quarter pace of 0.3% during the third quarter, compared to consensus expectations for a contraction of 0.2%, and by 1.2% in annual terms upon price and calendar adjustment.

Significantly, GDP was left standing 0.2% above its pre-Covid level.

It was a veritable dump of data across the pond during the afternoon, with US personal incomes and spending growing more quickly than expected last month, while price pressures came in a touch lower than anticipated.

According to the Department of Labor, personal incomes increased at a month-on-month pace of 0.4%, faster than the 0.3% analysts had pencilled in.

A gauge of salary and benefits pressures meanwhile grew as expected over the three months to September, with the Labor Department’s Employment Cost Index increasing at a quarter-on-quarter pace of 1.2%.

In American real estate, a lead indicator for the number of home sale contract signings fell at roughly twice the expected rate last month, with the National Association of Realtors' pending home sales index slumping at a month-on-month pace of 10.2% in September, marking a fourth consecutive monthly decline, to reach 79.5.

Economists had been anticipating a drop of 5.3%.

Finally stateside, US consumer sentiment improved a touch in October, but remained subdued, according to a final reading from the University of Michigan.

The Michigan consumer sentiment index rose to 59.9 from 58.6 in September, but was down from 71.7 in October 2021, with the figure in line with the preliminary reading.

Turning towards Asia, markets had their expectations again sated by the Bank of Japan earlier, after policymakers left interest rates unchanged, with the short-term policy rate target held at -0.1%.

The central bank said it would also buy as many Japanese government bonds as necessary, at a fixed rate, to keep 10-year bond yields at its target of 0%.

“The bank will support financing, mainly of firms, and maintain stability in financial markets, and will not hesitate to take additional easing measures if necessary,” the BoJ said in its statement.

On London’s equity markets, NatWest Group tanked 9.2% after it reported flat third-quarter profit of £1.1bn amid a deteriorating outlook, which fell short of expectations of £1.2bn.

“NatWest has rounded off the banks’ reporting season in mixed fashion, with some enforced financial writedowns blotting the overall copybook,” said Richard Hunter, head of markets at Interactive Investor.

“The planned withdrawal from the Republic of Ireland through its Ulster Bank subsidiary has led to a charge on the mortgage book of some €420m.”

Hunter added that NatWest had succumbed to the necessity of making bad debt provisions in line with most of its peers.

“Whereas the group bucked the trend in the second quarter by releasing £18m of provisions, for this quarter a charge of £242m has been made.

“This leaves the cumulative figure for this year as a provision of £193m, which compares to a release of £904m in the corresponding period last year, and the £1bn swing has affected overall numbers.”

The bank’s peers were also in the red, with Lloyds Banking Group down 3.53%, Standard Chartered off 3.02%, and Barclays 2.54% weaker.

British Airways owner IAG descended 3.66% despite swinging to a third-quarter profit, as airline travel continued to recover from the Covid pandemic.

Computacenter slid 4.14% after it said 2022 was set to be a year of "modest" growth in adjusted pre-tax profit following two "exceptional" years.

Shares in Asos fell 11.3% after a report that prominent hedge funds from both sides of the Atlantic had gone into battle with Frasers Group's Mike Ashley over his stake in the company, by increasing bets against the online fast-fashion retailer.

On the upside, British Gas owner Centrica rallied 5.08% after saying it had reopened the Rough gas storage facility off the east coast of Yorkshire, and was operating at about 20% of capacity, having completed engineering upgrades over the summer.

Airtel Africa was ahead 5.84%, having tumbled on Thursday after its half-year pre-tax profit missed analysts’ expectations.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,047.67 -0.37%
FTSE 250 (MCX) 17,916.67 -0.91%
techMARK (TASX) 4,235.07 0.19%

FTSE 100 - Risers

Airtel Africa (AAF) 114.10p 5.84%
Centrica (CNA) 73.16p 5.08%
GSK (GSK) 1,416.60p 2.13%
CRH (CDI) (CRH) 3,114.00p 2.08%
AstraZeneca (AZN) 10,124.00p 1.74%
Reckitt Benckiser Group (RKT) 5,678.00p 1.54%
Unilever (ULVR) 3,918.00p 1.37%
SSE (SSE) 1,547.00p 1.24%
Vodafone Group (VOD) 99.81p 1.16%
Rentokil Initial (RTO) 544.40p 1.04%

FTSE 100 - Fallers

NATWEST GROUP (NWG) 224.90p -9.20%
Harbour Energy (HBR) 374.00p -5.08%
Ocado Group (OCDO) 470.20p -5.05%
JD Sports Fashion (JD.) 96.90p -4.62%
Rio Tinto (RIO) 4,486.00p -3.82%
International Consolidated Airlines Group SA (CDI) (IAG) 115.28p -3.66%
M&G (MNG) 173.40p -3.59%
Lloyds Banking Group (LLOY) 41.27p -3.53%
Intermediate Capital Group (ICP) 1,047.50p -3.46%
Anglo American (AAL) 2,625.00p -3.35%

FTSE 250 - Risers

Telecom Plus (TEP) 2,120.00p 3.41%
Drax Group (DRX) 512.00p 3.27%
Helios Towers (HTWS) 114.20p 2.33%
Indivior (INDV) 1,639.00p 2.27%
3i Infrastructure (3IN) 314.50p 1.94%
TI Fluid Systems (TIFS) 138.60p 1.91%
International Public Partnerships Ltd. (INPP) 153.00p 1.86%
HICL Infrastructure (HICL) 166.40p 1.46%
Quilter (QLT) 97.44p 1.37%
Smithson Investment Trust (SSON) 1,280.00p 1.27%

FTSE 250 - Fallers

ASOS (ASC) 573.00p -11.30%
Hochschild Mining (HOC) 54.30p -8.66%
Jupiter Fund Management (JUP) 103.80p -5.38%
Urban Logistics Reit (SHED) 132.00p -5.38%
Bridgepoint Group (Reg S) (BPT) 209.00p -5.09%
Genuit Group (GEN) 263.00p -4.71%
W.A.G Payment Solutions (WPS) 79.10p -4.70%
Wizz Air Holdings (WIZZ) 1,611.00p -4.67%
Pets at Home Group (PETS) 284.20p -4.63%
Centamin (DI) (CEY) 90.00p -4.32%