London close: Stocks tumble as inflation, recession fears resurface

London stocks tumbled on Tuesday as worries about inflation and a global slowdown returned to rattle investors.

The FTSE 100 ended down 2.9% at 7,025.47.

Chris Beauchamp, chief market analyst at IG, said: "Once again, the return of US traders from their holiday has dealt the death blow to hopes of a European market rally that lasts longer than about 24 hours.

"This recurrence of selling has put indices across the board into the red, as growth and inflation fears return right on cue. Normally July provides some welcome relief to markets after a choppy June, but so far the instinct to sell any bounce, no matter how small, remains all-encompassing."

Even news that US President Biden could be rolling back some of the tariffs imposed on China during the Trump era failed to lift the mood.

On home shores, meanwhile, investors were mulling a survey showing that growth in the services sector was stronger than expected in June. The S&P Global/CIPS purchasing managers’ index for the sector rose to 54.3 from 53.4 in May, beating expectations and the flash estimate of no change.

It was also above the 50.0 mark that separates contraction from expansion for the sixth month in a row.

However, the survey also showed that new order growth declined to a 16-month low in June as economic uncertainty and rising inflation hit discretionary spending.

Meanwhile, the composite PMI - which measures activity in services and manufacturing - pushed up to 53.7 in June from 53.1 in May. This marked the second-weakest reading so far this year. The survey found that a slowdown in manufacturing production growth to its lowest since May 2020 was offset by a modest acceleration in service sector activity.

Tim Moore, economics director at IHS Markit, said: "The service sector remained in expansion mode during June, but persistently high inflation has started to dent discretionary spending and negatively influence demand projections across the board. New order growth was the weakest since the national lockdown in early-2021, with survey respondents reporting business and consumer hesitancy in response to the uncertain economic outlook.

"June data highlighted the second-fastest rise in input prices since the survey began 26 years ago, driven by intense wage pressures and rapid increases in fuel costs. Staff shortages added to demand and supply imbalances, with subsequent constraints on business capacity acting as a further incentive to defend margins from escalating operating expenses. Around 37% of the survey panel reported an increase in their charges since May and many commented on plans to push through further price rises in the second half of 2022."

In equity markets, miners and energy firms were under the cosh as commodity prices took a hit, with Anglo American, Glencore, Antofagasta, Harbour Energy, Shell and BP all lower.

Beauchamp said: "As supply concerns give way to seemingly-inescapable recession worries, oil and mining stocks have gone deep into the red, a situation that has been replicated on Wall Street too."

Dechra Pharmaceuticals was the top riser on the FTSE 100 after RBC Capital Markets upgraded the shares to ‘outperform’ from ‘sector perform’, saying "current levels provide an attractive entry point for what we see as a defensive business with good organic growth and history of solid execution".

Moneysupermarket also advanced after an upgrade to ‘buy’ at Liberum, while Drax powered ahead after JPMorgan Cazenove put the shares on "positive catalyst watch" and said it expects the company to upgrade guidance at its interim results.

Elsewhere, supermarket chain Sainsbury’s gained even as it said first-quarter underlying sales fell 4% as consumers started to cut back on discretionary spending amid the cost-of-living crisis.

Market Movers

FTSE 100 (UKX) 7,025.47 -2.86%
FTSE 250 (MCX) 18,315.31 -1.49%
techMARK (TASX) 4,264.45 -0.82%

FTSE 100 - Risers

Dechra Pharmaceuticals (DPH) 3,616.00p 5.30%
Croda International (CRDA) 6,772.00p 2.98%
SEGRO (SGRO) 977.00p 2.78%
Ocado Group (OCDO) 802.60p 2.27%
Spirax-Sarco Engineering (SPX) 10,320.00p 1.88%
3i Group (III) 1,103.50p 1.71%
Rightmove (RMV) 574.20p 1.41%
Halma (HLMA) 2,029.00p 1.20%
Sainsbury (J) (SBRY) 210.60p 1.06%
Experian (EXPN) 2,444.00p 0.74%

FTSE 100 - Fallers

Harbour Energy (HBR) 316.20p -9.63%
Shell (SHEL) 2,012.00p -8.67%
Anglo American (AAL) 2,605.00p -8.27%
Glencore (GLEN) 400.00p -7.99%
Rolls-Royce Holdings (RR.) 79.71p -7.89%
Antofagasta (ANTO) 1,021.00p -7.77%
Centrica (CNA) 75.86p -7.31%
BP (BP.) 373.30p -7.01%
Fresnillo (FRES) 726.80p -6.72%
Entain (ENT) 1,133.50p -6.52%

FTSE 250 - Risers

Ascential (ASCL) 272.60p 3.97%
Carnival (CCL) 647.80p 3.45%
Moneysupermarket.com Group (MONY) 180.80p 2.84%
LondonMetric Property (LMP) 230.40p 2.13%
Allianz Technology Trust (ATT) 207.50p 1.97%
Genus (GNS) 2,586.00p 1.81%
Darktrace (DARK) 292.10p 1.56%
Vivo Energy (VVO) 147.80p 1.51%
Tritax Big Box Reit (BBOX) 181.70p 1.45%
Worldwide Healthcare Trust (WWH) 3,160.00p 1.44%

FTSE 250 - Fallers

Hochschild Mining (HOC) 83.00p -11.42%
Wood Group (John) (WG.) 144.35p -7.14%
Energean (ENOG) 992.00p -6.94%
Tullow Oil (TLW) 42.28p -6.91%
888 Holdings (DI) (888) 162.00p -6.74%
National Express Group (NEX) 178.70p -6.10%
Investec (INVP) 411.80p -6.00%
Morgan Advanced Materials (MGAM) 262.50p -5.91%
RHI Magnesita N.V. (DI) (RHIM) 1,823.00p -5.64%
BlackRock World Mining Trust (BRWM) 536.00p -5.63%