London close: Stocks slide as recession fears rattle markets

Even Ian Dury would have struggled for a reason to be cheerful on Thursday, as fresh lockdowns in China, gloomy manufacturing data and a stark warning from the Resolution Foundation rattled markets.

The FTSE 100 ended down 1.9% at 7,148.50, while sterling was 0.8% weaker against the dollar at 1.1534 after the Resolution Foundation warned of a "frankly terrifying" outlook for living standards in the UK.

In a report out earlier, it cautioned that real household disposable incomes were on track to fall 10% over this year and the next, and that the number of people living in absolute poverty would likely rise by 3m to 14m people in 2023-24, unless policy or economic forecasts change.

CMC Markets analyst Michael Hewson said: "September has picked up where August left off with another day of red for European markets, which were already under pressure after a weak Asia session.

"Asia markets were already on the back foot after another weak PMI number from China; however, it was the announcement that Chinese authorities had put 21m people in Chengdu into lockdown, that really saw the wheels come off. With Covid outbreaks unlikely to diminish as we head into winter, the prospects for a China rebound this side of next year have virtually disappeared, raising concerns over a prolonged global slowdown.

"Today’s losses have been broad-based, as recession fears grow, against a backdrop of central banks who are determined to raise rates at the expense of growth."

Data out earlier showed that factory activity in China shrank in August as power cuts and Covid-19 curbs dented production.

The Caixin manufacturing purchasing managers’ index fell to 49.5 from 50.4 in July. This was below consensus expectations of 50.0, which is the level that separates contraction from expansion.

The latest UK manufacturing data was nothing to write home about either, suggesting the sector is on the brink of a recession.

The S&P Global/CIPS manufacturing PMI fell to a 27-month low of 47.3 from 52.1 in July, although it was above the flash estimate of 46.0. This marked the first reading below the 50 mark that separates contraction from expansion since May 2020, when the country was in its first Covid lockdown.

The survey showed that output and new orders contracted at the fastest rates since that first lockdown, as inflows from domestic and export markets slumped.

Eurozone manufacturing figures also did nothing to lift the mood, with activity in August contracting further as inflation dented purchasing power.

The S&P Global manufacturing PMI for the bloc fell to a 26-month low of 49.6 from 49.8 in July, versus the initial estimate of 49.7, and coming in below the 50.0 for the third month in a row. Both output and new orders declined in August. The survey found that weak demand was a major drag on goods producers, as high inflation dented purchasing power.

Ex-dividend stocks added to the sea of red, with Glencore, Admiral, Antofagasta, Hochschild, Endeavour, Redde Northgate, PageGroup and Centamin all trading without entitlement to the dividend.

Consumer goods giant Reckitt Benckiser slumped as it said chief executive officer Laxman Narasimhan will step down at the end of September.

Rio Tinto was also down after agreeing to buy the remaining shares in Canada’s Turquoise Hill Resources it does not already own for $3.3bn.

Advertising giant WPP lost ground as it announced the acquisition of European ecommerce consultancy Newcraft for an undisclosed sum.

On the upside, Pearson bucked the trend after JPMorgan Cazenove reinstated its ‘overweight’ rating on shares of the education publisher, highlighting its defensive qualities.

Centrica, SSE and Drax were also among the risers, having fallen sharply a day earlier amid worries about the potential for a windfall tax on their profits.

Market Movers

FTSE 100 (UKX) 7,148.50 -1.86%
FTSE 250 (MCX) 18,493.74 -2.99%
techMARK (TASX) 4,211.82 -2.33%

FTSE 100 - Risers

JD Sports Fashion (JD.) 115.10p 1.90%
Centrica (CNA) 76.70p 1.27%
Pearson (PSON) 873.40p 1.23%
Avast (AVST) 713.20p 0.88%
SSE (SSE) 1,664.50p 0.73%
Smith & Nephew (SN.) 1,016.50p 0.10%
Aveva Group (AVV) 2,800.00p 0.00%
BP (BP.) 441.20p -0.07%
Meggitt (MGGT) 797.60p -0.08%
Imperial Brands (IMB) 1,895.00p -0.08%

FTSE 100 - Fallers

Entain (ENT) 1,164.00p -8.56%
Intermediate Capital Group (ICP) 1,264.50p -7.50%
Rolls-Royce Holdings (RR.) 71.31p -7.39%
3i Group (III) 1,133.50p -6.75%
Glencore (GLEN) 442.00p -6.61%
Ocado Group (OCDO) 684.20p -5.76%
British Land Company (BLND) 406.10p -5.73%
St James's Place (STJ) 1,044.00p -5.69%
SEGRO (SGRO) 891.60p -5.45%
Admiral Group (ADM) 2,009.00p -5.33%

FTSE 250 - Risers

Drax Group (DRX) 655.00p 2.99%
FirstGroup (FGP) 118.50p 2.95%
Chrysalis Investments Limited NPV (CHRY) 73.30p 1.95%
Capricorn Energy (CNE) 234.60p 1.03%
Pennon Group (PNN) 942.50p 0.91%
Worldwide Healthcare Trust (WWH) 3,275.00p 0.77%
Bank of Georgia Group (BGEO) 2,005.00p 0.25%
Great Portland Estates (GPE) 498.80p 0.16%
BH Macro Ltd. GBP Shares (BHMG) 4,635.00p 0.11%
Micro Focus International (MCRO) 518.00p 0.00%

FTSE 250 - Fallers

Pagegroup (PAGE) 383.20p -11.75%
Baltic Classifieds Group (BCG) 130.80p -9.67%
Liontrust Asset Management (LIO) 833.00p -9.06%
Hochschild Mining (HOC) 59.15p -9.00%
Redde Northgate (REDD) 312.00p -8.91%
Molten Ventures (GROW) 342.40p -8.40%
Moonpig Group (MOON) 179.90p -8.17%
Clarkson (CKN) 2,770.00p -8.13%
Just Group (JUST) 66.20p -8.06%
Royal Mail (RMG) 253.60p -7.95%