London close: Stocks mixed on return from long weekend

London’s stock markets gave a mixed performance on returning from the bank holiday weekend on Tuesday, as market participants held onto hopes that a US debt ceiling deal would be approved this week.

The FTSE 100 dropped 1.38% to close at 7,522.07, while the FTSE 250 closed up slightly by 0.07% at 18,807.37.

Adding to the complexities was fresh economic data showing a rise in shop price inflation in May.

In the currency markets, sterling was last 0.41% stronger on the dollar to trade at $1.2406, while it advanced 0.26% against the euro to change hands at €1.1567.

“A reshuffle at Unilever and major weakness in oil and other commodities has meant that the FTSE 100 has retreated on a broad front,” said IG chief market analyst Chris Beauchamp.

“Even without the fresh uncertainty about the debt ceiling the index is at a fresh two-month low. It looks like stocks will have to face another wave of rate hikes around the globe, hitting global demand and knocking earnings.”

Retail price inflation rises, but service sector optimism remains

In economic news, retail price inflation in the UK hit a new record of 9.0% in May, up from 8.8% in the prior month according to the latest BRC-NielsenIQ data.

The continued increase came despite a small reprieve in the cost of food, which previously hit all-time highs.

There was a slight decrease in food price inflation, dropping to 15.4% from 15.7% in April.

However, inflation related to non-food items climbed to 5.8% from 5.5%.

Fresh food saw a slight dip in inflation, down to 17.2% from April’s 17.8%, while the costs of goods like coffee and chocolate rose due to increased global commodity prices.

“While overall shop price inflation rose slightly in May, households will welcome food inflation beginning to fall,” said Helen Dickinson, chief executive of the British Retail Consortium.

“The slow in inflation was largely driven by lower energy and commodity costs starting to filter through to the lower price of some staples, including butter, milk, fruit and fish.

“Fierce competition between supermarkets has helped keep British food among the cheapest of the large European economies.”

Despite the squeeze on costs and profits, however, optimism in the UK service sector remained resilient in May according to the CBI's latest quarterly sector survey.

Persistent cost pressures were recorded in business and professional services, with the net balance increasing from 58% to 61%, and profitability decreased for the sixth quarter running.

A similar trend was noted in consumer services.

Although business volumes decreased in both sub-sectors during the quarter, they were predicted to see growth and stabilisation in the next quarter respectively.

Sentiments regarding the general business situation remained largely unchanged, with net balances of -2% and 3% for business and professional services and consumer services respectively.

“It is encouraging that the quarter ahead looks brighter for services firms’ trading conditions. Business volumes are set to return to growth in the next three months, underpinning expectations or stronger employment growth and improved investment intentions,” said Charlotte Dendy, head of economic surveys and data at the CBI.

“However, rapid cost growth continues to squeeze margins and adds to mounting evidence that underlying inflationary pressures remain strong.”

On the continent, economic sentiment in the eurozone took a hit in May, indicating that the anticipated recovery might be hitting a snag.

The economic sentiment indicator dipped to 96.5 from 99.0 in April, falling short of the expected 98.9.

Both retail and construction sectors reported a decrease in sentiment.

Across the pond, US house prices rose for a consecutive month in March, driven by limited housing stock, according to the S&P CoreLogic Case-Shiller index.

However, compared to last year, price growth slipped to -0.7% in March from 2.1% in February, marking the first outright decrease since May 2012.

RHI Magnesita jumps on Rhone reports, Ocado falls on likely demotion

On London’s equity markets, online grocer Ocado Group fell 4.76%, as it braced for a likely exit from the FTSE 100.

Consumer goods conglomerate Unilever saw a 2.68% drop following the announcement of the retirement of its chief financial officer Graeme Pitkethly, with his departure scheduled for the end of May next year.

Aerospace and defence companies Rolls-Royce Holdings and BAE Systems also felt the heat, with their share prices down 3.38% and 0.83% respectively.

That came after India lodged a criminal complaint against the firms over allegations of "criminal conspiracy" in a deal involving the procurement and licensed manufacturing of 123 advanced jet trainers.

Shares in iconic bootmaker Dr. Martens dropped 4.52% following a downgrade from RBC Capital Markets from 'outperform' to 'sector perform'.

On the upside, advertising giant WPP managed gains of 0.37% after the announcement of a content engine deal with tech firm Nvidia.

RHI Magnesita, a supplier of refractory products, recorded a hefty surge of 23.61% after Ignite Luxembourg Holdings, managed indirectly by Rhone Holdings, proposed to acquire a 20% stake at a near-40% premium to its previous closing share price.

Lastly, energy services group Hunting jumped 13.4% on the back of an upward revision of its 2023 guidance.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,522.07 -1.38%
FTSE 250 (MCX) 18,807.37 0.07%
techMARK (TASX) 4,553.83 -0.82%

FTSE 100 - Risers

Frasers Group (FRAS) 690.00p 2.68%
B&M European Value Retail S.A. (DI) (BME) 471.90p 2.14%
Hargreaves Lansdown (HL.) 814.60p 1.77%
JD Sports Fashion (JD.) 153.45p 1.62%
Whitbread (WTB) 3,307.00p 1.54%
Abrdn (ABDN) 204.70p 1.44%
St James's Place (STJ) 1,128.00p 1.39%
SEGRO (SGRO) 798.00p 1.37%
SSE (SSE) 1,858.50p 1.36%
BT Group (BT.A) 145.90p 1.28%

FTSE 100 - Fallers

Ocado Group (OCDO) 391.90p -3.71%
Rolls-Royce Holdings (RR.) 144.40p -3.12%
Shell (SHEL) 2,282.00p -3.00%
Unilever (ULVR) 4,045.00p -2.97%
Johnson Matthey (JMAT) 1,741.50p -2.74%
Diageo (DGE) 3,402.50p -2.73%
British American Tobacco (BATS) 2,597.50p -2.72%
Haleon (HLN) 321.80p -2.48%
AstraZeneca (AZN) 11,498.00p -2.43%
Anglo American (AAL) 2,265.00p -2.31%

FTSE 250 - Risers

RHI Magnesita N.V. (DI) (RHIM) 2,534.00p 23.61%
Hunting (HTG) 228.50p 13.40%
Bytes Technology Group (BYIT) 493.60p 6.84%
Dechra Pharmaceuticals (DPH) 3,352.00p 6.75%
Pets at Home Group (PETS) 376.40p 5.20%
Intermediate Capital Group (ICP) 1,401.00p 3.93%
Molten Ventures (GROW) 293.80p 3.23%
Renishaw (RSW) 3,904.00p 2.41%
Urban Logistics Reit (SHED) 135.80p 2.41%
Direct Line Insurance Group (DLG) 168.95p 2.30%

FTSE 250 - Fallers

ASOS (ASC) 356.00p -12.32%
Synthomer (SYNT) 91.80p -6.75%
Dr. Martens (DOCS) 153.10p -5.08%
Ferrexpo (FXPO) 94.25p -4.46%
Investec (INVP) 406.10p -3.90%
Harbour Energy (HBR) 227.90p -3.49%
Bank of Georgia Group (BGEO) 3,070.00p -3.46%
Fidelity China Special Situations (FCSS) 208.00p -3.26%
NCC Group (NCC) 91.00p -3.19%
Future (FUTR) 752.50p -3.03%