London close: Stocks mixed as PM Starmer names his Cabinet

London’s stock markets ended the week on a mixed note on Friday, after a subdued response to Labour's general election victory, although housebuilders and the more domestically-focussed FTSE 250 made gains.

The FTSE 100 saw a slight decline of 0.45%, closing at 8,203.93 points, while the FTSE 250 rose 0.86% to end at 20,786.65 points.

In currency markets, sterling was last up 0.38% on the dollar, trading at $1.2809, while it rose 0.24% against the euro to change hands at €1.1829.

“Despite UK voters handing its new Labour government an absolute majority with which to govern, the FTSE 100 and sterling were little fazed at first, before US stock indices dragged the UK blue chip index and its European peers down as the US labour market remains robust,” said IG senior market analyst Axel Rudolph.

“The main beneficiaries of the UK election result were UK housebuilders which gained around 3% on the day, while banks and energy companies slid.”

Rudolph noted that slightly lower US average earnings, marginally higher US unemployment and a downward revision of last month's non-farm payrolls were not enough to counterbalance the US economy adding more jobs than expected in June.

“[That’s] paring back September rate cut expectations and leading to profit taking in US equities and an appreciating dollar.

“US Treasury yields remained under pressure, though.”

Keir Starmer names Cabinet as her forms new Labour government

In a busy day for politics, newly-minted prime minister Keir Starmer swiftly formed his Cabinet late on Friday after Labour's decisive victory over the Conservative Party in Thursday's general election.

It marked a historic defeat for the Conservatives, who lost power after 14 years of governance.

Key appointments in Starmer’s Cabinet included Angela Rayner as deputy prime minister and secretary of state for Levelling Up, Housing, and Communities, Rachel Reeves as finance minister, David Lammy as foreign secretary, John Healey as defence secretary, and Yvette Cooper as home secretary.

Labour’s triumph was underscored by Starmer's invitation from King Charles to form a government, followed by a celebratory address at Downing Street.

Starmer promised to restore respect in politics, avoid ideological extremes, and unite the country.

Outgoing prime minister Rishi Sunak acknowledged the Conservative Party's “sobering verdict” from the electorate and accepted responsibility for the defeat.

The loss included significant Conservative figures such as former prime minister Liz Truss.

With Labour securing 412 seats, an increase of 211, and the Conservatives plummeting to 121 seats, the shift in political power was stark.

The Liberal Democrats gained 63 seats, reaching 71, while the SNP faced a backlash, losing 38 seats and retaining only nine.

US wage growth shows signs of easing

In economic news, hiring and wage growth in the US showed signs of easing last month.

The Department of Labor reported a growth of 206,000 in non-farm payrolls for June, surpassing the consensus expectation of 190,000.

Average hourly earnings increased by 0.3% month-on-month and 3.9% year-on-year, the latter being the lowest annual growth since Q2 2021.

On home shores, UK house prices remained largely unchanged in June, according to Halifax's house price index.

Average prices saw a slight monthly decline of 0.2%, maintaining an annual growth rate of 1.6%, the same as in May.

The average UK house price now stood at £288,931.

“This continued stability in house prices - rising by just 0.4% so far this year - reflects a market that remains subdued, though overall activity has been recovering,” said Amanda Bryden, head of mortgages at Halifax.

“For now, it’s the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices.

“Mortgage affordability is still the biggest challenge facing both homebuyers and those coming to the end of fixed-term deals.”

Elsewhere, high street sales in the UK saw a significant increase last week, driven by a rise in online shopping.

BDO's latest tracker reported a 6.41% rise in total like-for-like sales for the week ended 30 June, compared to a 4.36% increase the same week the previous year.

In-store sales rose 1.51%, while non-store sales surged by 18.27%.

Fashion sales led the gains with a 12.53% increase, supported by demand for summer clothing and promotional activities.

Footfall at retail parks increased by 1.8%, remained steady on high streets, but fell by 2.6% in shopping centres.

On the continent, retail sales in the eurozone saw a modest rebound in May, rising by 0.1% after a decline the previous month, according to Eurostat.

Growth was limited by a 0.2% decrease in non-food product sales excluding fuel.

Sales of food, drinks, and tobacco increased by 0.7%, while automotive fuel sales rose by 0.4%.

Finally on data, Germany's industrial production experienced an unexpected decline in May, marking the worst contraction in two and a half years.

Destatis reported a 2.5% month-on-month drop in production, following a revised 0.1% increase in April.

That was only the second monthly decline in 2024 and the largest since December 2022.

Housebuilders the standout performers, banks in the red

On London’s equity markets, housebuilders were among the standout performers following Labour's decisive election win, driven by the party's commitment to constructing 1.5 million new homes.

Vistry Group saw a 3.42% increase, Persimmon rose by 2.27%, Taylor Wimpey gained 2.15%, Barratt Developments advanced 3.85%, Berkeley Group climbed 2.16%, and Crest Nicholson grew 2.21%.

Crest Nicholson also received an additional boost from reports of a takeover bid by Avant Homes, although Crest said later in the day that it was currently not inclined to engage in discussions.

RBC Capital Markets highlighted Labour's ambitious plans for the housing sector, anticipating significant policy changes that could drive further growth for housebuilders.

It particularly noted that Taylor Wimpey, Persimmon, and Vistry stood to benefit the most from these anticipated changes.

On the downside, Shell fell 1.4% following a second-quarter update revealing a potential $2bn hit due to halted construction on a biofuels plant in Rotterdam and the sale of a refinery in Singapore.

Banking stocks also faced pressure, with HSBC down 2.62%, Standard Chartered dropping 1.87%, and Barclays falling 2.05%.

In broker note action, Lloyds Banking Group went against the sector trend and rose 1.61%, after receiving a rating upgrade from BNP Exane.

Close Brothers Group meanwhile surged of 4.7% following an initiation at ‘buy’ from Deutsche Bank, which cited substantial value in the shares despite current overhangs.

Softcat was 6.62% weaker after being downgraded to ‘underperform’ by Jefferies.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,203.93 -0.45%
FTSE 250 (MCX) 20,786.65 0.86%
techMARK (TASX) 4,755.68 -0.08%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 3,656.00p 3.51%
United Utilities Group (UU.) 1,025.00p 3.45%
Vistry Group (VTY) 1,302.00p 3.42%
Severn Trent (SVT) 2,506.00p 3.17%
Fresnillo (FRES) 593.00p 2.86%
Taylor Wimpey (TW.) 153.00p 2.82%
Barratt Developments (BDEV) 504.00p 2.44%
Persimmon (PSN) 1,464.00p 2.23%
Berkeley Group Holdings (The) (BKG) 4,826.00p 2.16%
B&M European Value Retail S.A. (DI) (BME) 443.50p 2.07%

FTSE 100 - Fallers

HSBC Holdings (HSBA) 673.60p -2.56%
Standard Chartered (STAN) 723.00p -2.19%
Smiths Group (SMIN) 1,700.00p -2.19%
InterContinental Hotels Group (IHG) 8,070.00p -2.13%
Ashtead Group (AHT) 5,112.00p -2.07%
Aviva (AV.) 471.40p -2.00%
Rio Tinto (RIO) 5,259.00p -1.87%
Whitbread (WTB) 2,956.00p -1.83%
Barclays (BARC) 220.55p -1.69%
Rolls-Royce Holdings (RR.) 454.20p -1.67%

FTSE 250 - Risers

Ocado Group (OCDO) 328.20p 7.43%
Savills (SVS) 1,198.00p 6.96%
Kier Group (KIE) 148.40p 6.76%
4Imprint Group (FOUR) 6,260.00p 5.56%
Close Brothers Group (CBG) 479.20p 5.18%
Ithaca Energy (ITH) 129.60p 4.52%
Ibstock (IBST) 179.20p 4.07%
Marshalls (MSLH) 322.00p 4.04%
Playtech (PTEC) 506.00p 3.69%
Volution Group (FAN) 478.50p 3.57%

FTSE 250 - Fallers

Softcat (SCT) 1,679.00p -6.62%
Trustpilot Group (TRST) 222.00p -3.48%
Carnival (CCL) 1,231.50p -2.69%
Watches of Switzerland Group (WOSG) 414.20p -2.27%
Harbour Energy (HBR) 308.00p -2.22%
Indivior (INDV) 1,160.00p -2.11%
Bridgepoint Group (Reg S) (BPT) 239.40p -1.64%
Scottish American Inv Company (SAIN) 510.00p -1.16%
Auction Technology Group (ATG) 477.00p -1.14%
Just Group (JUST) 105.40p -1.13%