London close: Stocks pummeled by global growth concerns

London stocks suffered very sharp declines on Wednesday amid ongoing worries about a global slowdown, even as investors digested Prime Minister Boris Johnson's proposal to Brussels for a free trade area and as regards the Irish border, which analysts said were not likely to fly with the European Union as they would give Northern Ireland a competitive advantage over the bloc.

"Equity markets have suffered severe losses today as traders remain worried about the state of the global economy. In London, the energy sector plus the mining sector are nursing large losses on the back of the dismal manufacturing reports from major economies around the world this week," said David Madden, market analyst at CMC Markets UK.

And on the chances of the PM's proposal being accepted by Brussels, Samuel Tombs at Pantheon Macroeconomics said: "We continue to expect a general election to be held in December. [...] But Mr. Johnson's last-minute Brexit proposals won't cut the mustard with the EU."

Tombs believed that a Labour-LD-SNP coalition government was likely to result from early elections, together with a further Brexit delay in January, although "no prediction can be advanced confidently at this stage".

By the end of the trading day, the FTSE 100 was 3.23% weaker at 7,122.54 and had recorded the weakest start to the fourth quarter since 2014, while the pound was down 0.03% higher against the US dollar at 1.2261 and off by 0.22% versus the euro to 1.1224.

More broadly, worries about a global slowdown were reignited ahead of the all-important monthly official US non-farm payrolls figures scheduled to be published on Friday by a weaker than expected reading on US consultancy ADP's monthly payrolls report - although some analysts believed that (at least for September) the ADP data might have been distorted to the downside .

That followed the release of dismal manufacturing data on Tuesday from the US Institute for Supply Management, while on Monday, Chinese and Eurozone manufacturing figures disappointed, while the UK manufacturing PMI for September beat expectations but remained in contraction territory.

Looking at the details of the details of the ISM report, Jim Reid at Deutsche Bank described the data as "shocking", pointing out to clients how it had been the weakest in a decade and how a key gauge tied to export orders had plumbed its lowest level since the Great Financial Crisis.

"If we look at the full 380 months’ of history, this [sub-]index has only been lower than it is right now on 6 occasions," Reid added.

The mood wasn’t helped after Germany’s leading economic institutes slashed their growth forecasts for the country this year and the next, pinning the blame on weaker global demand for manufacturing goods and rising business uncertainty on the back of the Sino-US trade spat.

The news on home shores was no better as the latest IHS/Markit CIPS survey showed that the downturn in the UK construction sector worsened in September as Brexit uncertainty and the weak economic outlook saw clients delay investment decisions.

The construction total activity index printed at 43.3 in September, down from 45.0 for August and marked the second-strongest deterioration since April 2009. Economists had been expecting no change.

Anything below 50.0 is a contraction, anything above it records growth.

Respondents recorded a historically steep drop in new orders, while employment was trimmed at the fastest rate since the end of 2010.

Joe Hayes, economist at IHS Markit, said: "The UK construction sector remained mired in a downturn at the end of the third quarter. Activity is being pulled down at its second-fastest clip for over a decade, as firms are buffeted by client hesitancy, heightened Brexit uncertainty and a weak outlook for the UK economy.

"Overall, the performance of the UK economy once again hinges on the services sector showing a market degree of resilience to offset the weaknesses seen in construction and manufacturing."

In equity markets, growth concerns dented the mining sector, with Antofagasta, Anglo American and BHP all trading lower.

Hargreaves Lansdown was the worst performer on the top-flight index a day after Credit Suisse initiated coverage of the stock at ‘underperform’ saying the premium valuation is difficult to support in the face of near-term headwinds and that "momentum looks challenging".

Standard Life Aberdeen was also on the back foot as it said vice chairman Martin Gilbert was set retire.

Marks & Spencer was knocked lower by a downgrade to ‘hold’ at Peel Hunt, while Hastings was hit by a downgrade to ‘underperform’ at RBC Capital Markets.

On the upside, Flutter Entertainment, formerly Paddy Power, surged as it agreed an all-share merger with Nasdaq and Toronto-listed Stars Group, a provider of technology-based product offerings in the global gaming industries and the owner of Poker Stars. William Hill and GVC Holdings also rallied.

Tesco reversed earlier losses after the supermarket retailer announced the departure of chief executive Dave Lewis alongside its interim results, as the company said its turnaround was complete.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Tesco appears to be in a good position, and has worked hard to fend off rising competition in the sector. Investors will look forward to hearing Ken Murphy’s plans for defending, and expanding, Tesco’s enviable market position in due course."

Defence technology company QinetiQ gained after agreeing to buy Manufacturing Techniques Inc. in a deal that would more than double the size of its US operations.

Market Movers

FTSE 100 (UKX) 7,122.54 -3.23%
FTSE 250 (MCX) 19,476.91 -1.99%
techMARK (TASX) 3,792.41 -1.96%

FTSE 100 - Risers

Flutter Entertainment (FLTR) 8,164.00p 6.94%
Tesco (TSCO) 240.00p 0.21%
Polymetal International (POLY) 1,135.00p -0.39%
Ferguson (FERG) 6,152.00p -0.55%
Imperial Brands (IMB) 1,830.00p -1.61%
Morrison (Wm) Supermarkets (MRW) 195.20p -1.96%
Mondi (MNDI) 1,546.50p -2.06%
Standard Chartered (STAN) 652.80p -2.10%
National Grid (NG.) 864.30p -2.13%
Unilever (ULVR) 4,785.50p -2.18%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 1,855.00p -7.53%
Kingfisher (KGF) 195.95p -6.33%
Associated British Foods (ABF) 2,160.00p -6.25%
3i Group (III) 1,088.00p -5.60%
Antofagasta (ANTO) 838.20p -5.33%
Ashtead Group (AHT) 2,139.00p -4.89%
Burberry Group (BRBY) 2,001.00p -4.84%
Rio Tinto (RIO) 4,006.00p -4.65%
Rolls-Royce Holdings (RR.) 740.00p -4.57%
Barratt Developments (BDEV) 618.20p -4.36%

FTSE 250 - Risers

QinetiQ Group (QQ.) 308.00p 5.62%
William Hill (WMH) 192.95p 3.57%
Rank Group (RNK) 195.00p 2.96%
Plus500 Ltd (DI) (PLUS) 767.80p 2.21%
PZ Cussons (PZC) 208.00p 1.96%
Pets at Home Group (PETS) 219.60p 1.67%
Sirius Real Estate Ltd. (SRE) 73.50p 1.66%
4Imprint Group (FOUR) 3,060.00p 0.66%
Mitchells & Butlers (MAB) 386.00p 0.65%
Cobham (COB) 158.30p 0.38%

FTSE 250 - Fallers

Riverstone Energy Limited (RSE) 536.00p -7.59%
Aston Martin Lagonda Global Holdings (AML) 478.40p -6.09%
PureTech Health (PRTC) 243.00p -5.49%
Intermediate Capital Group (ICP) 1,337.00p -5.38%
Kaz Minerals (KAZ) 396.90p -5.23%
SIG (SHI) 118.20p -5.21%
AJ Bell (AJB) 378.50p -5.14%
Provident Financial (PFG) 384.00p -5.11%
Micro Focus International (MCRO) 1,046.40p -5.10%
Drax Group (DRX) 262.00p -4.73%