London close: Stocks sink as manufacturing data weighs

London's stock markets faced significant downturns at the close of trade on Monday, with both the FTSE 100 and the FTSE 250 indices ending the session in negative territory.

The declines came after disappointing UK manufacturing data, weighing heavily on investor sentiment.

By the close, the FTSE 100 had shed 1.28% to close at 7,510.72 points, while the FTSE 250 faced an even steeper decline, closing down 1.65% at 17,977.29.

On the currency front, sterling was last down 0.6% on the dollar to trade at $1.2126, while it managed gains of 0.1% against the euro to change hands at €1.1550.

“Squabbling politicians in the US might have managed to patch up the US government’s funding position for now, but the knowledge that we will have to repeat the drama in about six weeks means that there is little positive sentiment to be found in stock markets right now,” said IG chief market analyst Chris Beauchamp.

“The traditionally strong fourth quarter hasn’t got off to a flying start, though at least tech stocks have put their best foot forward.”

Manufacturing under strain amid rising interest rates

In economic news, the manufacturing sector in the UK showed signs of contraction in September, with the S&P Global/CIPS purchasing managers' index unveiling a marginal increase from August's 43.0 - a 39-month low - to 44.3 in September.

Although that demonstrated a slowing pace of contraction, any figure below 50 still indicates a decline - a scenario the UK has faced for most of the last 14 years.

“September saw the manufacturing sector still mired in contraction territory, as weak conditions at home and abroad hit new order intakes and led to a further scaling back of production volumes,” said Rob Dobson, director at S&P Global Market Intelligence.

“The cost-of-living crisis and recent rapid rise in interest rates are taking their toll, according to producers, raising the possibility of the broader UK economy slipping back into contraction during the second half of the year.

“The downturn is being felt throughout the manufacturing sector, with demand falling from both households and businesses.”

On the housing front, survey data from lender Nationwide highlighted ongoing pressures in the market.

Annual house prices saw another dip in September, with a 5.3% decline, echoing the same downward trend as August and marking the weakest performance since July 2009.

While monthly prices stabilised, the average property price currently stood at £257,808.

“Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, circa 30% below the monthly average prevailing in 2019 before the pandemic struck,” said Nationwide chief economist Robert Gardner.

“This relatively subdued picture is not surprising given the more challenging picture for housing affordability.

“For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take-home pay on their monthly mortgage payment - well above the long-run average of 29%.”

Europe's manufacturing sector was not faring much better, as the HCOB manufacturing purchasing managers’ index recorded a slight dip from 43.5 in August to 43.4 in September, making for 15 consecutive months of contraction.

Germany and Austria were grappling with the most severe declines, closely trailed by the Netherlands and France.

However, it was not all bleak news in Europe, with Eurostat's latest data revealing a positive shift in unemployment trends both in the eurozone and the broader European Union.

The eurozone saw a drop in unemployment from 6.5% in July 2023 to 6.4% in August, as the EU followed suit, registering a decline from 6.0% to 5.9% over the same period.

Across the Atlantic, America's manufacturing sector also faced a contraction, albeit at a lessened rate than the prior month.

The Institute for Supply Management's PMI for September indicated a rise to 49.0, up from August's 47.6.

Notably, both the production and new order subindices experienced an uplift.

Key players rise after strong announcements, Antofagasta faces dip

On London’s equity markets, defence stalwart BAE Systems experienced an upswing of 0.97% after the UK Ministry of Defence allotted it a generous £3.95bn for the subsequent phase of the nation's next-generation nuclear-powered attack submarine programme, termed SSN-AUKUS.

That positive momentum was further bolstered by Berenberg's decision to upgrade the stock to 'buy' from a previous 'hold' stance, revising the price target upward from 1,050p to 1,170p.

Water management company United Utilities saw its stock advance 0.46% as it rolled out its strategic plans for the 2025-2030 period.

With a projected expenditure of £13.7bn, the company forecast an 8.7% annual growth in its regulated capital value.

Additionally, the scheme was expected to support 30,000 jobs in the northwest region, offering 7,000 fresh job opportunities.

The initiative also promised affordability programmes worth £525m, which would benefit over one-sixth of its clientele.

Fellow water utility Pennon Group jumped 3.07% after it revealed that it had been trading in line with expectations for its first half and presented proposals to Ofwat for a £2.8bn investment dedicated to water quality and resilience.

The hefty investment, targeted for South West Water for the 2025-2030 period, anticipated generating 2,000 job opportunities and fostering 1,000 apprenticeships and graduate roles.

International recruiter PageGroup observed a 0.81% climb in shares, influenced by an upgrade at Jefferies, which shifted its stance to 'hold' from an earlier 'underperform'.

“Although perm activity is more vulnerable to an economic slowdown, and we believe consensus earnings per share is overoptimistic, we are mindful that long-term risk/reward has altered post the recent capital markets day),” the bank said.

It lifted its price target on the shares to 420p from 375p.

On the downside, despite starting the trading day positively, Chilean copper miner Antofagasta eventually recorded a 1.29% decline.

The company had received a 'buy' upgrade from Citi earlier in the day, stemming from potential volume recovery and valuation factors.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,510.72 -1.28%
FTSE 250 (MCX) 17,977.29 -1.65%
techMARK (TASX) 4,220.26 -2.81%

FTSE 100 - Risers

InterContinental Hotels Group (IHG) 6,156.00p 1.35%
BAE Systems (BA.) 1,009.00p 1.12%
Entain (ENT) 941.00p 0.88%
United Utilities Group (UU.) 950.60p 0.25%
Scottish Mortgage Inv Trust (SMT) 671.20p 0.24%
International Consolidated Airlines Group SA (CDI) (IAG) 148.15p 0.10%
Frasers Group (FRAS) 806.00p 0.06%
Whitbread (WTB) 3,466.00p 0.06%
Vodafone Group (VOD) 76.82p 0.00%
Next (NXT) 7,292.00p -0.05%

FTSE 100 - Fallers

Beazley (BEZ) 532.50p -3.79%
SSE (SSE) 1,552.50p -3.57%
NATWEST GROUP (NWG) 227.70p -3.39%
RS Group (RS1) 710.60p -3.37%
Centrica (CNA) 148.95p -3.33%
Prudential (PRU) 860.20p -3.22%
WPP (WPP) 710.00p -3.14%
Diploma (DPLM) 2,912.00p -3.13%
National Grid (NG.) 949.80p -3.08%
Legal & General Group (LGEN) 215.70p -3.06%

FTSE 250 - Risers

Pennon Group (PNN) 608.50p 3.84%
Digital 9 Infrastructure NPV (DGI9) 39.95p 3.23%
Essentra (ESNT) 166.60p 3.09%
Syncona Limited NPV (SYNC) 119.00p 2.23%
Mobico Group (MCG) 90.70p 2.14%
Helios Towers (HTWS) 74.80p 1.91%
Moonpig Group (MOON) 165.40p 1.35%
Greggs (GRG) 2,478.00p 1.23%
easyJet (EZJ) 432.30p 1.17%
Pantheon International (PIN) 295.00p 1.03%

FTSE 250 - Fallers

Investec (INVP) 453.30p -5.90%
Mitchells & Butlers (MAB) 213.40p -5.58%
OSB Group (OSB) 309.20p -5.56%
Wood Group (John) (WG.) 147.00p -5.34%
Future (FUTR) 842.00p -5.29%
Discoverie Group (DSCV) 640.00p -5.16%
Ninety One (N91) 162.30p -5.14%
Ithaca Energy (ITH) 174.80p -5.10%
North Atlantic Smaller Companies Inv Trust (NAS) 3,420.00p -5.00%
Close Brothers Group (CBG) 845.00p -4.63%