London close: Stocks mixed on data, US debt ceiling worries

London’s equity markets closed in a mixed state on Friday, as investors weighed fresh economic data from both sides of the Atlantic.

The FTSE 100 index rose 0.31% to close at 7,754.62, while the FTSE 250 dropped 0.4% to end the day at 19,188.37.

Investors were also closely monitoring political movements in Washington, where talks were underway in a bid to raise the US federal government's debt ceiling.

In currency markets, sterling was also in a mixed situation, last trading down 0.36% on the dollar at $1.2466, while it strengthened 0.16% on the euro to change hands at €1.1480.

“It’s been a softish and subdued week for equity markets, with concerns about slowing global demand appearing to weigh on risk sentiment more broadly, although as we head into the weekend, we are seeing some modest gains on the day,” said CMC Markets chief market analyst Michael Hewson.

“Increasing concerns over slowing demand haven’t been helped by deflation in Chinese factory gate prices for the sixth month in a row earlier this week.

“This has seen copper prices hit their lowest levels this year, and oil prices on course for their fourth weekly decline in succession.”

Hewson added that the situation had not been helped by the political theatre around the US debt ceiling, which was dominating discourse in the media, and where discussions had been pushed into next week.

“While the risks around this are well-rehearsed it could be argued that the risks appear somewhat overstated given how regularly we’ve seen this scenario play out over the last few years on a regular ‘rinse and repeat’ basis before a late compromise is sealed.”

UK economy contracts in March, retail sales slow over bank holiday

In economic news, the UK economy contracted by 0.3% in March according to data released earlier by the Office for National Statistics (ONS).

Despite the downturn, GDP for the first quarter experienced 0.1% growth, boosted by a stagnant February and a 0.5% expansion in January.

The services sector saw a 0.1% increase, while the construction and production sectors grew by 0.7% and 0.1%, respectively.

The ONS attributed the largest negative effects in March to the motor trade and retail sectors, impacted by adverse weather conditions and rising food prices.

Industrial action across various industries, including education, health, public administration and defence, and transport, also played a role in the downturn.

“The UK remains the only G7 country in which the main quarterly measure of GDP has not recovered to its pre-Covid peak yet - it was still 0.5% below its fourth quarter 2019 level in the first quarter,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“This chiefly reflects weakness in the households’ real spending, which was 2.3% below its fourth quarter 2019 level.

“But at least the magnitude of the underperformance is not increasing relative to other countries in Europe, which have faced a similarly enormous energy price shock.”

Elsewhere, retail sales in the UK declined due to the bank holiday and inconsistent weather last week.

The BDO high street sales tracker reported a 3.21% year-on-year drop in like-for-like sales for the week ended 7 May .

In-store sales decreased by 1.7%, while non-store sales fell by 3.58%.

Lifestyle goods sales saw a 7.85% increase, but homewares and fashion sales dropped significantly, by 14.39% and 7.49%, respectively.

Across the pond, US import prices increased in April for the first time this year, driven by a 4.5% rise in fuel import costs.

The US Department of Commerce reported a 0.4% month-on-month growth in seasonally adjusted import prices, while non-fuel import prices remained steady.

However, the decline in import prices for March was revised from -0.6% to -0.8%.

Finally on data, uncertainty surrounding the debt ceiling standoff and the economy in general led to a decline in US consumer sentiment in May.

The University of Michigan's consumer confidence index fell from 63.5 in April to 57.7 in mid-May, missing economists' forecast for 63.0.

Expectations for the economy over the next year decreased by 23% compared to the prior month, while long-term expectations dropped by 16%.

"Consumers are worried that any economic downturn will not be brief," said survey director Joanne Hsu.

"Throughout the current inflationary episode, consumers have shown resilience under strong labour markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge.

THG tumbles, GSK rises after sale of Haleon stake

On London’s equity markets, online retailer THG fell 8.1% after it ended takeover discussions with US private equity firm Apollo Global Management.

The bid was rejected due to an "inadequate valuation" as well as its offer structure, which was similar to previous offers THG had received.

Distilling giant Diageo also decreased, sliding 2.38% after a downgrade to 'hold' from 'buy' by analysts at Jefferies.

On the upside, infrastructure group Balfour Beatty managed gains of 0.21% after it announced expectations for flat annual profits, and current trading in line with expectations.

The company's order book was valued at £17bn, compared to £17.4bn at the end of December.

Insurance specialist Beazley was ahead 3.24% following strong first-quarter growth and a reiteration of its full-year guidance.

Gross premiums grew by 12% to $1.37bn, and net premiums were ahead by 24% to $1.07bn, with the full-year combined ratio projected in the high 80s.

Airtel Africa added 2.95%, a day after the company reported a dip in full-year profits due to $250m in charges linked to foreign exchange and derivatives contracts.

GSK and Haleon saw increases in their share prices, up 1.84% and 0.47%, respectively.

Those moves came after GSK announced the sale of a 2.5% stake in Haleon at 335p per share, raising £804m.

Both GSK and Pfizer, which held a 32% stake in the GlaxoSmithKline spin-out, committed not to dispose of any further shares in Haleon for 60 days after the settlement of the placing.

Reporting by Josh White for Sharecast.com.

FTSE 100 +24.04 (+0.31%) 7,754.62

RISERS
Beazley +3.24% 605.5p
Airtel Africa +2.95% 115p
JD Sports Fashion +2.76% 173.25p
Persimmon +2.45% 1,336p
3i Group +2.03% 1,835p
GSK +1.84% 1,471.43p
Rolls-Royce Holdings +1.68% 148.35p
ConvaTec Group +1.56% 221,8p
SSE +1.3% 1,886.28p
Compass Group +0.57% 2,126p

FALLERS
Diageo -2.35% 3,534.5p
Ocado Group -2.21% 443p
British Land Company -2.05% 374.15p
Land Securities Group -1.95% 613.8p
Unite Group -1.67% 910.5p
Smurfit Kappa Group -1.39% 2,980p
Mondi -1.35% 1,281p
Fresnillo -1.33% 681.2p
Prudential -1.08% 1,168.74p
Kingfisher -0.54% 251.94p

FTSE 250 -77.93 (-0.4%) 19,188.37

RISERS
4imprint Group +7.9% 4,531.61p
Redrow +2.92% 528p
Crest Nicholson Holdings +2.9% 263p
Molten Ventures +2.37% 267.4p
Bellway +2.25% 2,456p
Bank of Georgia Group +1.99% 3,325p
Mitchells & Butlers +1.76% 196.5p
Coats Group +1.66% 73.7p
Target Healthcare REIT +1.54% 79.1p
Vistry Group +0.91% 780.04p

FALLERS
NextEnergy Solar Fund -5.19% 102.2p
Ferrexpo -5.16% 104.7p
Great Portland Estates -4.59% 488p
Derwent London -4.23% 2,176p
Essentra -3.96% 198.8p
Petershill Partners -3.82% 151p
Integrafin Holdings -3.11% 280.6p
IG Group Holdings -2.27% 710.5p
TUI -1.22% 519.96p
Carnival -0.87% 717.49p