London close: Stocks mixed as uncertainty simmers

London stocks were in a mixed state at the close on Friday, with sterling similarly struggling for direction amid ongoing political uncertainty, as data showed that retail sales slumped and government borrowing leapt in September.

The FTSE 100 ended the session up 1.62% at 6,969.73, while the FTSE 250 lost 1.05% to 17,206.55.

Sterling, meanwhile, was last 0.21% stronger on the dollar at $1.1259, while it weakened 0.41% against the euro to change hands at €1.1434.

“It’s been another negative day for European markets, although a retreat in short term yields, which is acting as a drag on the US dollar, is helping to support a rebound off the lows of the day,” said CMC Markets chief market analyst Michael Hewson.

“The FTSE 100 even managed to claw its way back into positive territory during the afternoon session, despite retailers showing significant weakness on the back of another big slide in UK retail sales in September, while a profits warning from Adidas isn’t helping either.

“The rise in UK gilt yields is acting as a drag on house builders as concerns rise that the UK budget statement might be delayed by any new incoming Prime Minister.”

Indeed, the fallout from Thursday’s resignation of prime minister Liz Truss after just 44 days in the job was still the big focus on Friday, as Britons swallowed the idea of a second Tory leadership contest in as many months.

MPs Rishi Sunak and Penny Mordaunt were among those set to vie for the tenancy of 10 Downing Street, alongside disgraced former premier Boris Johnson, who was reportedly rushing back from a Caribbean holiday.

Politics aside, investors were mulling the latest data from the Office for National Statistics, which showed that retail sales tumbled in September, weighed down by soaring prices, the cost-of-living crisis and the state funeral of Queen Elizabeth II.

Sales volumes fell 1.4% in September, making them 1.3% below February 2020, pre-Covid, while analysts had been expecting a decline of around 0.5%.

The ONS said retailers blamed rising prices and the cost-of-living squeeze for the fall in sales, with the data further affected by the bank holiday for the late queen’s funeral, when many shops were closed.

In the three months to September, sales volumes were down by 2.0% when compared to the previous three month-period, extending a downward trend that started in summer 2021.

Year-on-year, sales volumes fell 5.4% over the same period, while sales values spiked 5.5%.

The ONS also revised August’s fall in sales volumes, to 1.7% from 1.6%.

Alongside the retail sales data, the ONS also published figures showing a steep increase in government borrowing in September.

Public sector net borrowing excluding public sector banks (PSNB ex) was £20bn last month, £2.2bn up on the same month a year previously and the second-highest September since records began in 1993.

In the financial year to September 2022, PSNB ex was £72.5bn, £24.9bn less than in the same period last year but £35.6bn more than in the financial year to September 2019, pre-Covid.

Public sector net debt excluding public sector banks stood at £2.45trn as at the end of September, around 98% of GDP.

That was an increase of £213bn, or 2.5 percentage points of GDP, compared to September 2021.

“With the latest figures indicating a drop in retail sales and a further increase in government borrowing, the intense pressure will remain on not just the economy itself, but also for the country as an investment destination which had been showing some signs of life and overseas interest earlier in the year,” said Richard Hunter, head of markets at Interactive Investor.

The latest GfK survey did little to help the mood either, as it showed consumer confidence edged higher in October but remained at historic lows.

GfK’s consumer confidence index increased by two points to -47, after three measures rose, including both the personal financial situation and general economic situation for the next 12 months. They rose by 6 points to -34, and by 7 points to -61, respectively.

However, the overall index remained close to September’s historic low of -49, the weakest since the survey was launched in 1974.

“Households are not just running scared of burgeoning energy and food prices, and the prospect of further base rate rises increasing mortgage costs,” said Joe Staton, client strategy director at GfK.

“They are now facing the likelihood of tax rises and even austerity measures.

"For ordinary consumers, this web of uncertainty and turmoil amounts to a new abnormal.”

In equity markets, retailers were under the cosh after the ONS data, with JD Sports Fashion down 6.1%, Frasers Group off 4.02%, Ocado Group losing 1.88%, Next falling 2.85%, and B&M European Value Retail 2.49% lower.

InterContinental Hotels Group slumped 2.1% even after it reported a rise in third-quarter hotel room revenue, driven by strong demand as business and leisure travel recovered from the Covid pandemic.

The company also said chief financial officer Paul Edgecliffe-Johnson will step down in six months to join gambling group Flutter.

Commercial property owner Hammerson also fell, tumbling 6.28% as investors fretted about the rising cost of debt.

On the upside, components maker Essentra reversed earlier gains to rise 1.44% after saying it expected annual results to be in line with expectations after a 11% rise in third-quarter like-for-like sales.

Shares in polymer maker Synthomer rallied another 4.04% after it announced on Thursday that it had agreed a relaxation of loan covenants with its banks to provide it increased headroom through to the end of next year.

The company, which last week lowered its profit outlook and scrapped the dividend, said bank debt covenants had been increased to 4x in December 2022, increasing to 4.75x in June 2023 and reverting to 4x in December 2023.

Elsewhere, Ferrexpo was up 2.87% and Centamin gained 2.17% on the back of higher commodity prices.

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

Market Movers

FTSE 100 (UKX) 6,969.73 0.37%
FTSE 250 (MCX) 17,206.55 -1.05%
techMARK (TASX) 4,123.40 -0.07%

FTSE 100 - Risers

Glencore (GLEN) 502.10p 3.59%
Anglo American (AAL) 2,734.00p 3.05%
Antofagasta (ANTO) 1,149.00p 2.68%
GSK (GSK) 1,392.40p 2.01%
Endeavour Mining (EDV) 1,539.00p 1.79%
Rio Tinto (RIO) 4,805.00p 1.61%
Standard Chartered (STAN) 567.00p 1.43%
Severn Trent (SVT) 2,363.00p 1.42%
Pershing Square Holdings Ltd NPV (PSH) 2,790.00p 1.27%
HSBC Holdings (HSBA) 477.85p 1.05%

FTSE 100 - Fallers

Auto Trader Group (AUTO) 486.20p -6.18%
JD Sports Fashion (JD.) 94.18p -6.10%
Frasers Group (FRAS) 621.00p -4.02%
Rightmove (RMV) 459.10p -2.96%
Next (NXT) 4,738.00p -2.85%
Centrica (CNA) 67.36p -2.72%
B&M European Value Retail S.A. (DI) (BME) 301.10p -2.49%
Spirax-Sarco Engineering (SPX) 10,300.00p -2.42%
Burberry Group (BRBY) 1,840.00p -2.18%
InterContinental Hotels Group (IHG) 4,467.00p -2.10%

FTSE 250 - Risers

Balanced Commercial Property Trust Limited (BCPT) 82.10p 4.16%
Synthomer (SYNT) 103.00p 4.04%
UK Commercial Property Reit Limited (UKCM) 60.00p 3.65%
PZ Cussons (PZC) 193.20p 3.32%
Ferrexpo (FXPO) 118.20p 2.87%
Jupiter Fund Management (JUP) 99.90p 2.83%
TBC Bank Group (TBCG) 1,850.00p 2.78%
Bluefield Solar Income Fund Limited (BSIF) 130.00p 2.77%
BlackRock World Mining Trust (BRWM) 599.00p 2.57%
Rathbones Group (RAT) 1,820.00p 2.48%

FTSE 250 - Fallers

W.A.G Payment Solutions (WPS) 78.70p -6.97%
Future (FUTR) 1,213.00p -6.86%
Hammerson (HMSO) 17.62p -6.28%
Volution Group (FAN) 294.50p -5.76%
International Distributions Services (IDS) 190.10p -5.47%
Genuit Group (GEN) 265.00p -5.36%
Aston Martin Lagonda Global Holdings (AML) 101.50p -5.23%
ASOS (ASC) 510.00p -5.03%
Baltic Classifieds Group (BCG) 132.60p -5.01%
Ascential (ASCL) 185.30p -4.97%