London close: Stocks turn lower on fresh vaccine jitters
London stocks had turned lower by the close on Thursday, as investors mulled over the latest reading on the UK services sector.
The FTSE 100 ended the session downtown 1.52% at 5,850.86, and the FTSE 250 was off 1.38% at 17,459.69.
Sterling was weaker against both of its major trading pairs, last losing 0.63% on the dollar to $1.3266, and falling 0.44% against the euro to €1.1213.
“European equity markets were enjoying a rally earlier today on the back of hopes regarding a vaccine for the coronavirus, but the painful move lower in the US has weighed on indices on this side of the Atlantic,” said CMC Markets analyst David Madden.
“The Centers for Disease Control said the US needs to be ready to deliver a Covid-19 vaccine around the country from early November.
“Dealers took that as a sign the CDC is hopeful that one of the many pharma companies that are trying to develop a drug to tackle the coronavirus could be successful in the few months.”
Madden noted that Dr Anthony Fauci, a disease specialist, cast doubt that a vaccine would be developed by the end of October, but said it was not impossible, which took some of the wind out of the bull’s sails.
“The sharp falls seen in the US have prompted selling in Europe.”
On home shores, data showed the services sector expanded rapidly in August, although rising job cuts raised fears the recovery could be short-lived.
The IHS Markit/CIPS services purchasing managers' index rose to 58.5 from 56.5 in July as businesses and consumers spent after the end of coronavirus lockdowns.
A score of 50 separates expansion from contraction.
The result was the strongest since April 2015, helped by a busy housing market supported by a stamp duty holiday, the government's Eat Out to Help Out restaurant subsidy and a recovery in business services.
But the survey showed signs of excess capacity as work backlogs reduced and a third of respondents reported reductions to staffing levels.
Employers shed jobs at the steepest pace since May as the government's furlough programme began to wind down.
“A further surge in service sector business activity in August adds to signs that the economy is enjoying a mini boom as business re-opens after the lockdowns, but the concern is that the rebound will fade as quickly as it appeared,” said Chris Williamson, chief business economist at IHS Markit.
“The current expansion is built on something of a false reality, with the economy temporarily supported by measures including the furlough and Eat Out to Help Out schemes.
“These props are being removed.”
In equity markets, Melrose Industries rallied 12.59% after saying it planned big job cuts at its GKN Aerospace business as the industrial turnaround company reported a first-half loss of £560m.
The company's pre-tax loss for the six months to the end of June widened from £131m a year earlier as revenue dropped to £4.1bn from £5.6bn.
Melrose said GKN's sales were expected to fall by up to 30% in 2020 and that it would make a "significant reduction" to the division's global workforce in the second half.
Analysts said the results were better than feared and pointed to the fact Melrose highlighted encouraging signs of recovery over the summer at its automotive and powder metallurgy businesses.
Engine maker Rolls-Royce gained 5.7% after winning a contract worth many millions of euros to provide the neutron flux monitoring system for two nuclear reactors under construction in China.
Capita continued to advance by 3.24% despite saying it had not received an offer from private equity firm CVC Capital Partners.
This is Money had reported that CVC was eyeing up the outsourcer following an 80% slump in its share price so far this year.
On the downside, Admiral was down 4.21%, BHP lost 5.82% and Antofagasta dropped 3.96% as their stock went ex-dividend, while retailer Next was knocked 4.41% lower by a downgrade to ‘underweight’ at Morgan Stanley.
Market Movers
FTSE 100 (UKX) 5,850.86 -1.52%
FTSE 250 (MCX) 17,459.69 -1.38%
techMARK (TASX) 3,761.58 -1.40%
FTSE 100 - Risers
Melrose Industries (MRO) 113.15p 12.59%
International Consolidated Airlines Group SA (CDI) (IAG) 215.80p 6.36%
ITV (ITV) 62.00p 4.94%
Compass Group (CPG) 1,272.00p 3.67%
British Land Company (BLND) 358.80p 2.34%
Barclays (BARC) 105.56p 1.99%
Imperial Brands (IMB) 1,273.00p 1.96%
BT Group (BT.A) 103.40p 1.67%
WPP (WPP) 626.80p 1.56%
Whitbread (WTB) 2,500.00p 1.21%
FTSE 100 - Fallers
Scottish Mortgage Inv Trust (SMT) 907.50p -6.35%
Ocado Group (OCDO) 2,372.00p -6.02%
BHP Group (BHP) 1,639.00p -5.82%
Intermediate Capital Group (ICP) 1,266.00p -5.45%
Evraz (EVR) 319.00p -4.63%
Next (NXT) 5,764.00p -4.41%
Glencore (GLEN) 166.74p -4.38%
Admiral Group (ADM) 2,568.00p -4.21%
Anglo American (AAL) 1,768.80p -4.18%
Taylor Wimpey (TW.) 120.85p -4.13%
FTSE 250 - Risers
SSP Group (SSPG) 260.40p 8.05%
easyJet (EZJ) 628.60p 6.43%
Carnival (CCL) 1,091.00p 6.39%
Shaftesbury (SHB) 534.50p 5.74%
National Express Group (NEX) 120.60p 5.70%
CLS Holdings (CLI) 206.00p 4.89%
TUI AG Reg Shs (DI) (TUI) 338.10p 4.67%
Go-Ahead Group (GOG) 675.00p 4.49%
Mitchells & Butlers (MAB) 169.20p 4.32%
Balfour Beatty (BBY) 228.20p 3.45%
FTSE 250 - Fallers
Barr (A.G.) (BAG) 383.00p -8.81%
Energean (ENOG) 507.60p -7.20%
Computacenter (CCC) 2,096.00p -6.84%
Kainos Group (KNOS) 1,014.00p -6.11%
Softcat (SCT) 1,338.00p -6.11%
Games Workshop Group (GAW) 8,685.00p -5.70%
Pershing Square Holdings Ltd NPV (PSH) 2,070.00p -5.48%
Allianz Technology Trust (ATT) 2,435.00p -5.44%
Kaz Minerals (KAZ) 547.80p -5.19%
Greencoat UK Wind (UKW) 134.20p -5.09%