London close: Stocks give up earlier gains after big Truss u-turn

London stocks gave up most of their earlier gains by the close on Friday, but still finished in the green, after the prime minister delivered a much-anticipated u-turn and gave her chancellor the sack.

The FTSE 100 ended the session up 0.12% at 6,858.79, and the FTSE 250 was ahead 0.61% at 17,032.82.

Sterling was in the red, meanwhile, to last trade down 1.02% on the dollar at $1.1210, as it weakened 0.63% against the euro to change hands at €1.1510.

“Kwasi Kwarteng has been ousted from number 11 just three weeks on from the fateful mini-budget that was ultimately responsible for his demise,” said IG senior market analyst Joshua Mahony.

“Liz Truss remains in charge for now, but there are rumours that her decision to reverse the corporation tax cut will do little to help her stay in the post much longer than Kwarteng.”

For traders, Mahony said Friday haad provided “yet another bout” of unpredictable volatility, with the risk-on momentum driven by falling yields reversing as political turmoil took hold again.

“Unfortunately for Truss, her swift ability to spook markets with a swathe of unfunded spending plans is now being followed by yet another rise in yields as markets wonder whether we could soon see another push to replace her.”

Indeed, embattled prime minister Liz Truss was forced into a humiliating u-turn earlier, abandoning her pledged marquee cut in corporation tax, as she said she planned to stay in power hours after sacking her finance minister and ideological soulmate Kwasi Kwarteng.

In another tumultuous day of drama, Truss told a news conference that barely lasted 10 minutes the increase would raise £18bn a year and be used as a "downpayment on our fiscal plan".

The rise takes place next April and was introduced by former finance minister Rishi Sunak who lifted the rate to 25% from 19%.

Ditching the planned rise was one of Truss's flagship policies during the Conservative Party's leadership campaign following the resignation of the discredited Boris Johnson.

"I want to be honest, this is difficult. But we will get through this storm and we will deliver the strong and sustained growth that can transform the prosperity of our country for generations to come," she told reporters.

"But we recognise because of current market issues, we have to deliver the mission in a different way. That’s why we are absolutely committed to achieving that stability or what is a very difficult time globally."

Truss said she was "incredibly sorry" to lose Kwarteng and called him a "great friend" who "shares my vision to set this country on the path to growth".

He was replaced by Jeremy Hunt, who ran for the party leadership on a pledge to cut corporation tax to 15%, even further than the prime minister's desired 19%.

In economic news, US consumer sentiment improved a little more than expected in October, according to a preliminary reading from the University of Michigan.

The Michigan consumer sentiment index rose to 59.8 from 58.6 in September, but was down from 71.7 in October 2021.

Current economic conditions printed at 65.3 in October versus 59.7 the month before, and down from 77.7 a year earlier.

Staying stateside, US import prices decreased in September according to the Bureau of Labor Statistics, with lower fuel and non-fuel prices both contributing to the drop.

The price index for US imports decreased 1.2% last month and 3.7% in the third quarter - the largest three-month decline since the index fell 4.3% for the three months ended May 2020.

Prices for US exports fell 0.8% in September, following a 1.7% decline in August, and 6.2% in the third quarter.

The quarterly drop was the largest three-month decrease since the index fell 7.3% from September to December 2008.

Elsewhere, US retail sales were flat on the month in September as inflation and rising interest rates dented demand, according to figures from the Commerce Department.

Economists had been expecting retail sales to edge up 0.2%, following an upwardly-revised 0.4% jump in August.

Excluding autos, gasoline, building materials and food services, control group sales rose 0.4% last month.

That was ahead of consensus expectations for a 0.3% increase.

Turning to the East, inflation pushed higher in China last month according to official data, after a sharp increase in food prices.

The National Bureau of Statistics said consumer price inflation rose by 2.8% in September, against 2.5% in August and largely in line with consensus.

It was the sharpest rise since April 2020, when the CPI jumped 3.3%,

One of the biggest drivers behind the hike was food inflation, which increased to 8.8% year-on-year from 6.1% in August.

Pork inflation surged to 36.0% from 22.4% a month earlier, supported by rising holiday demand and lower slaughter rates.

On London’s equity markets, banks and housebuilders were still in the green, with Barclays up 0.2%, Lloyds Banking Group ahead 1.63%, Taylor Wimpey rising 2.26%, Barratt Developments adding 2.08%, and Berkeley Group closing 1.51% firmer following recent heavy losses.

Packaging and paper group Mondi gained 2% after it reported a 55% jump in third-quarter underlying core earnings amid higher selling prices and volume growth.

Online grocer and warehousing technology developer Ocado Group jumped 5.12% after America’s largest grocery chain Kroger - with which it has a partnership - agreed to buy the country’s second-largest grocer Albertsons in a $24.6bn deal.

Segro was in the green by 3.88% as gilt yields fell, as real estate investment trusts are known to act as a bond proxy.

Utilities were also on the rise, with British Gas owner Centrica up 2.43% and United Utilities Group 2.5% higher.

Ladbrokes owner Entain gained 1.32% after saying on Thursday that third-quarter net gaming revenue had ticked higher, and that online gaming revenue for the fourth quarter was expected to rise, thanks in part to the World Cup.

On the downside, International Distribution Services tumbled 10.47% after it said Royal Mail division was looking to cut 10,000 jobs by the end of August 2023, and warned of financial losses due to industrial action and lower parcel volumes.

The newly-renamed Royal Mail parent company said the job loss figure could include up to 6,000 redundancies.

For the current fiscal year, Royal Mail forecast an adjusted operating loss of around £350m, including the direct, immediate impact of eight days of industrial action which had taken place or been notified to Royal Mail, but excluding any charges for voluntary redundancy costs.

"This may increase to around a £450m loss if customers move volume away for longer periods following the initial disruption," it added.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Iain Gilbert and Abigail Townsend.

Market Movers

FTSE 100 (UKX) 6,858.79 0.12%
FTSE 250 (MCX) 17,032.82 0.61%
techMARK (TASX) 4,081.95 0.26%

FTSE 100 - Risers

Ocado Group (OCDO) 456.80p 4.82%
SEGRO (SGRO) 739.40p 3.88%
Unite Group (UTG) 829.50p 2.92%
Rentokil Initial (RTO) 500.20p 2.73%
United Utilities Group (UU.) 854.40p 2.50%
Centrica (CNA) 71.62p 2.43%
B&M European Value Retail S.A. (DI) (BME) 314.10p 2.38%
Taylor Wimpey (TW.) 88.56p 2.26%
F&C Investment Trust (FCIT) 874.00p 2.22%
Rightmove (RMV) 466.60p 2.15%

FTSE 100 - Fallers

Harbour Energy (HBR) 399.10p -5.02%
BAE Systems (BA.) 790.80p -3.51%
Fresnillo (FRES) 703.00p -3.46%
Rio Tinto (RIO) 4,751.50p -2.59%
Prudential (PRU) 872.20p -2.31%
Anglo American (AAL) 2,593.00p -2.11%
Standard Chartered (STAN) 541.60p -1.78%
Endeavour Mining (EDV) 1,465.00p -1.08%
Shell (SHEL) 2,278.50p -1.04%
Scottish Mortgage Inv Trust (SMT) 723.40p -0.85%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 1,490.50p 9.03%
Pagegroup (PAGE) 406.00p 6.73%
Workspace Group (WKP) 370.80p 6.61%
Quilter (QLT) 90.96p 5.60%
Hipgnosis Songs Fund Limited NPV (SONG) 86.40p 4.98%
TR Property Inv Trust (TRY) 284.50p 4.79%
easyJet (EZJ) 306.30p 4.65%
Petrofac Ltd. (PFC) 99.55p 4.46%
Aston Martin Lagonda Global Holdings (AML) 95.30p 4.31%
Jlen Environmental Assets Group Limited NPV (JLEN) 114.00p 4.01%

FTSE 250 - Fallers

International Distributions Services (IDS) 187.75p -10.47%
Ferrexpo (FXPO) 114.90p -5.43%
Hochschild Mining (HOC) 59.45p -4.80%
RHI Magnesita N.V. (DI) (RHIM) 1,584.00p -4.69%
TBC Bank Group (TBCG) 1,716.00p -4.67%
W.A.G Payment Solutions (WPS) 80.10p -4.64%
Energean (ENOG) 1,335.00p -3.54%
Softcat (SCT) 1,084.00p -3.39%
Morgan Advanced Materials (MGAM) 241.00p -3.02%
Genuit Group (GEN) 270.00p -2.70%