London close: Stocks slip as investors brace for US inflation

London stocks closed with losses on Wednesday, influenced by a pessimistic growth outlook from the World Bank and investors' attention to upcoming US inflation data.

The FTSE 100 index declined 0.42%, ending the session at 7,651.76 points, while the FTSE 250 index experienced a slight dip of 0.07% to 19,280.08 points.

In currency markets, sterling was last up 0.12% on the dollar, trading at $1.2725, while it dropped 0.16% against the euro to change hands at €1.1608.

“In London, the FTSE 100 has seen a more negative tone to trading today, hit hard by falls for Sainsbury’s and Admiral,” said IG chief market analyst Chris Beauchamp.

“The former’s good Christmas food performance did offset its poorer sales in other categories, and given this was the problem for M&S for so long investors will fret that Sainsbury’s is heading in a similar direction.

“While housebuilders have propped up the index following Persimmon’s update, broader risk-off sentiment could prevail tomorrow and beyond should US inflation show signs of reviving.”

Beauchamp added that the countdown to the next US inflation reading had begun, with investors “hunkering down” ahead of a potentially volatile period for markets.

“The month so far has been relatively quiet, and the past few days have seen the equity rally flicker into life, most notably for the Nikkei 225.

“But overall the gains have been cautious.”

World Bank warns of global economic weakness

In economic news, the World Bank’s latest 'Global Economic Prospects' report came with a warning, indicating that the global economy was poised for its weakest growth since the pandemic.

The report predicted a slowdown in global growth to 2.4% in 2024, down from the 2.6% recorded in the prior year.

World Bank chief economist and senior vice-president Indermit Gill expressed concerns, saying that unless significant corrective actions were taken, the 2020s could be remembered as a decade of missed opportunities.

“With the World Bank forecasting that geo-political crises will drag global growth back to the slowest pace since the pandemic, there is little momentum for the internationally focused FTSE 100,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“The Bank is forecasting that trade and investment will also be stifled by conflict.

“Although oil has ticked back up with supply issues rearing up again amid fears the Gaza-Israel war will escalate, metals prices have largely fallen back, putting pressure on mining stocks.”

Across the Atlantic, the Mortgage Bankers Association reported a substantial 9.9% increase in US mortgage application volumes for the week ended 5 January, marking the most significant surge seen in a year.

Notably, applications for mortgage refinancing saw a 19% week-on-week increase and a substantial 30% year-on-year rise.

Applications for home purchase mortgages also rose by 6% week-on-week, but they remained 16% lower compared to the same period last year.

The growth came in contrast to the previous week's significant 10.7% drop, even though the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances inched up to 6.81% from 6.76%.

Finally on data, there was an unexpected rebound in industrial output in France during November, according to the National Institute of Statistics and Economic Studies (Insee).

Industrial production saw a 0.5% increase in November, following a 0.3% decline in October, surpassing expectations of no change.

That marked the first monthly growth in output since July.

The upturn in production was attributed to increased activity in machinery and equipment goods manufacturing, as well as in mining and quarrying, energy, and water supply product sectors, according to Insee.

Insurers on the back foot, Persimmon leads housebuilders higher

On London’s equity markets, Admiral Group declined 5.62%, while Direct Line Insurance Group saw a more substantial drop of 7.35%.

The falls for the insurance sector was attributed to a report in the Insurance Post, which quoted the head of insurance at the Financial Conduct Authority (FCA) as expressing concerns about premium finance, referring to it as a "poor product”.

Supermarket J Sainsbury decreased 6.34% after it held its full-year profit guidance and reported strong volume growth, but saw weaker performance.

Sainsbury's did, however, mention that robust Christmas grocery sales had increased by 8.6%.

On the upside, housebuilder Persimmon jumped 6.29% after it exceeded its guidance for new home completions in 2023.

A strong fourth-quarter performance put the company in a favourable position for 2024, with private forward sales surpassing the previous year.

Although new home completions in 2023 were down 33% due to challenging market conditions and rising mortgage rates, the performance still exceeded the target set in November.

Other companies in the housing sector also saw gains, with Berkeley Group Holdings up 2.21%, Barratt Developments rising 1.56%, and Vistry Group finishing 3.55% higher.

High-street bakery chain Greggs added 5.09% after it reaffirmed its full-year guidance and reported a significant increase in fourth-quarter sales, particularly driven by high demand for seasonal products.

In broker note action, Intertek Group was up 2.14% after receiving an upgrade to 'outperform' from RBC Capital Markets, while Capita slid 7.99% following a downgrade by the same outfit.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,651.76 -0.42%
FTSE 250 (MCX) 19,280.08 -0.07%
techMARK (TASX) 4,288.92 -0.52%

FTSE 100 - Risers

Berkeley Group Holdings (The) (BKG) 4,898.00p 2.34%
Intertek Group (ITRK) 4,286.00p 2.14%
InterContinental Hotels Group (IHG) 7,186.00p 1.73%
Taylor Wimpey (TW.) 148.40p 1.61%
Barratt Developments (BDEV) 553.40p 1.58%
Relx plc (REL) 3,162.00p 1.48%
Next (NXT) 8,544.00p 1.40%
Burberry Group (BRBY) 1,397.00p 1.16%
Pershing Square Holdings Ltd NPV (PSH) 3,550.00p 1.08%
Intermediate Capital Group (ICP) 1,596.50p 1.01%

FTSE 100 - Fallers

Sainsbury (J) (SBRY) 286.50p -6.34%
Admiral Group (ADM) 2,569.00p -5.62%
BT Group (BT.A) 116.60p -3.64%
Flutter Entertainment (CDI) (FLTR) 12,845.00p -3.53%
Ocado Group (OCDO) 685.00p -3.25%
Endeavour Mining (EDV) 1,464.00p -3.11%
Fresnillo (FRES) 524.20p -3.03%
Marks & Spencer Group (MKS) 277.70p -3.00%
Beazley (BEZ) 512.50p -2.94%
NATWEST GROUP (NWG) 215.10p -2.63%

FTSE 250 - Risers

Persimmon (PSN) 1,478.50p 6.25%
Greggs (GRG) 2,602.00p 5.17%
Ferrexpo (FXPO) 81.50p 4.55%
Vistry Group (VTY) 999.50p 4.22%
IWG (IWG) 184.20p 4.13%
Darktrace (DARK) 333.40p 3.77%
Aston Martin Lagonda Global Holdings (AML) 212.60p 3.10%
Jupiter Fund Management (JUP) 77.75p 2.91%
Trustpilot Group (TRST) 145.60p 2.68%
Syncona Limited NPV (SYNC) 122.80p 2.68%

FTSE 250 - Fallers

Direct Line Insurance Group (DLG) 166.15p -7.46%
Tullow Oil (TLW) 31.44p -5.07%
Tritax Eurobox (GBP) (EBOX) 57.80p -4.30%
AO World (AO.) 87.95p -3.62%
Me Group International (MEGP) 124.60p -3.56%
Essentra (ESNT) 159.20p -3.52%
IntegraFin Holding (IHP) 294.40p -3.48%
Auction Technology Group (ATG) 465.00p -3.43%
Drax Group (DRX) 517.20p -3.22%
PureTech Health (PRTC) 199.00p -3.16%