London close: Stocks lower as rate rise still weighs

London’s stock market concluded a lacklustre trading week with losses across the board on Friday, as continued investor concern over the recent interest rate hike weighed heavily on shares, particularly in the housebuilding sector.

The FTSE 100 Index fell 0.54%, closing at 7,461.87 points, and the more domestically focused FTSE 250 lost 1.45% to end the session at 18,062.33.

In currencies, sterling was last down 0.38% on the dollar to trade at $1.2699, while it strengthened 0.26% against the euro to change hands at €1.1665.

“Disappointing eurozone flash manufacturing and services PMI led to further selling in European equity markets which ended the week in the red after five consecutive days of falling prices,” said IG senior market analyst Axel Rudolph.

“The FTSE 100 is trading back in negative territory year-to-date and is fast approaching its March banking crisis low as worries of a UK recession due to rapidly rising interest rates mount.”

UK private sector growth slows, euro area activity eases

In economic news, the S&P Global/CIPS UK services PMI business activity index showed a three-month low at 53.7 for June.

Despite being above the neutral 50.0 level and indicative of growth, the result still fell short of the expected 54.8 and last month's 55.2.

The manufacturing output index remained stable at 47.7, with the manufacturing PMI, on the other hand, slipping to a six-month low of 46.2 from the previous 47.1.

The composite output index, which factors both manufacturing and services, reduced from 54.0 in May to 52.8, underperforming the anticipated 53.6.

S&P Global noted this as the most sluggish private sector growth since March, due to a "much softer" increase in new orders as certain clients reduced spending.

“June’s survey indicates that the UK has lost momentum again after a brief growth spurt in the spring, and looks set to weaken further in the months ahead,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“Most notably, consumer spending on services – a core growth driver in the spring – is now showing signs of faltering as the reality of higher interest rates, the increase cost of living and gloom about the outlook sets in.”

Inflation rates presented a diverse image, with manufacturing survey participants reporting the first decline in factory gate charges in over seven years, whereas service providers registered steep price hikes driven by high staffing costs.

Elsewhere, UK retail sales in May saw an unexpected boost, aided by warmer weather, according to data from the Office for National Statistics.

Retail sales increased by 0.3% following April's 0.5% rise, defying predictions of a 0.2% fall.

Non-store retail sales volumes experienced a 2.7% surge, mainly due to robust sales of outdoor goods and summer clothing by online retailers.

The favourable weather in May's latter half was a significant factor in this increase.

However, food store sales saw a dip of 0.5%, with retailers attributing this to the rising cost of living and food prices, despite anecdotal evidence of increased takeaway and fast food spending tied to the extra bank holiday.

“The further rebound in retail sales volumes in May suggests the recent resilience in economic activity hasn’t yet faded,” said Ruth Gregory, deputy chief UK economist at Capital Economics.

“But we think it’s too soon to conclude the rebound in retail sales will be sustained and the economy will avoid a recession.”

In the eurozone, June saw a considerable slowdown in factory and service sector activity, with France experiencing the most significant drop, partially due to strikes.

German activity, too, was near stagnant.

The HCOB flash composite output purchasing managers' index for the euro area fell from May's 52.8 to 50.3 in July.

S&P Global suggested that this downturn indicated a "renewed weakness in the economy after the brief growth recorded in the spring".

Housebuilders tumble, GSK soars on Zantac settlement

On London’s equity markets, major housebuilding companies registered significant losses as investor anxiety escalated over increasing borrowing costs.

Berkeley Group fell 2.56%, Persimmon by 4.03%, Barratt Developments by 2.61%, Taylor Wimpey by 1.95%, Redrow by 3%, Crest Nicholson Holdings by 3.89%, and Bellway by 2.69%.

Elsewhere, Ocado Group, which saw a surge in value on Thursday due to speculation of a possible Amazon takeover, fell by 5.32%.

On the upside, GSK enjoyed a surge in value, increasing by 4.87% following news that a Zantac trial due to commence next month in California was dismissed owing to a confidential agreement.

Its spin-off Haleon also experienced a boost on the news, with shares rising by a modest 0.62%.

“News pharmaceutical giant GSK has settled a case in California alleging its Zantac heartburn medication caused cancer, while crucially admitting no liability, is not a full stop on the saga but is the latest punctuation point in what shareholders will hope is its final stanza,” said Danni Hewson, head of financial analysis at AJ Bell.

“Once the world’s best-selling drug, there have been a series of lawsuits brought in the US implying a link between Zantac and cancer but, so far, GSK has been able to navigate its way through these choppy waters.

“A court ruling in Florida before Christmas, which provided a comprehensive dismissal of the plaintiffs’ arguments, proved a bit of a lode star for the company.”

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,461.87 -0.54%
FTSE 250 (MCX) 18,062.33 -1.45%
techMARK (TASX) 4,481.84 -0.02%

FTSE 100 - Risers

GSK (GSK) 1,425.20p 4.87%
Croda International (CRDA) 5,564.00p 2.05%
Convatec Group (CTEC) 210.40p 1.74%
British American Tobacco (BATS) 2,625.00p 1.37%
Pearson (PSON) 821.80p 1.33%
Vodafone Group (VOD) 72.69p 1.10%
Imperial Brands (IMB) 1,772.50p 1.05%
Halma (HLMA) 2,259.00p 1.03%
Smith & Nephew (SN.) 1,236.00p 1.02%
Admiral Group (ADM) 2,116.00p 1.00%

FTSE 100 - Fallers

Ocado Group (OCDO) 537.60p -5.32%
Smith (DS) (SMDS) 268.10p -4.39%
International Consolidated Airlines Group SA (CDI) (IAG) 158.85p -4.16%
Persimmon (PSN) 1,059.00p -4.03%
JD Sports Fashion (JD.) 143.80p -3.97%
Anglo American (AAL) 2,248.00p -3.56%
Glencore (GLEN) 432.65p -2.99%
Frasers Group (FRAS) 683.00p -2.78%
Unite Group (UTG) 857.00p -2.72%
Antofagasta (ANTO) 1,452.50p -2.71%

FTSE 250 - Risers

NCC Group (NCC) 93.00p 3.33%
Volution Group (FAN) 366.60p 2.75%
Bakkavor Group (BAKK) 97.40p 2.53%
Petershill Partners (PHLL) 160.00p 2.04%
The Renewables Infrastructure Group Limited (TRIG) 112.40p 1.81%
Me Group International (MEGP) 169.00p 1.68%
Hipgnosis Songs Fund Limited NPV (SONG) 82.00p 1.23%
North Atlantic Smaller Companies Inv Trust (NAS) 3,600.00p 1.12%
Moneysupermarket.com Group (MONY) 270.40p 1.05%
Coats Group (COA) 68.90p 1.03%

FTSE 250 - Fallers

Ferrexpo (FXPO) 84.70p -5.99%
Hammerson (HMSO) 23.90p -5.76%
CLS Holdings (CLI) 127.00p -5.65%
IWG (IWG) 138.50p -5.53%
Victrex plc (VCT) 1,338.00p -5.51%
Tritax Eurobox (GBP) (EBOX) 51.70p -5.48%
Mitchells & Butlers (MAB) 203.80p -5.47%
Wizz Air Holdings (WIZZ) 2,663.00p -5.47%
Sirius Real Estate Ltd. (SRE) 83.15p -5.24%
TUI AG Reg Shs (DI) (TUI) 545.00p -4.89%