London close: Stocks weaker after busy week for rate decisions

London's stock markets ended the week on a subdued note on Friday as investors digested recent central bank policy updates.

The FTSE 100 index closed down 0.95% at 7,576.36 points, while the FTSE 250 fared slightly better with a 0.25% decline, settling at 19,208.97.

In currency markets, sterling was last down 0.52% on the dollar, trading at $1.2700, while it saw a 0.26% uptick against the euro to change hands at €1.1643.

"After six to seven weeks of consecutive weekly gains some European and US stock indices are beginning to show fatigue amid a $5trn 'triple witching' in US options coinciding with S&P 500 and Nasdaq 100 rebalancing," said IG senior market analyst Axel Rudolph.

"Traders are taking money off the table amid comments by New York Fed President John Williams, who said that it is premature to be thinking about a March rate cut.

"Further upside into year-end may still be in store, though, as China's industrial output growth hits 21-month highs, UK private sector output growth rises to a six-month high, and US private sector growth accelerates."

UK business activity reaches high, US industrial output falls short

In economic news, UK business activity reached a six-month high in December, according to fresh survey data.

The S&P Global/CIPS flash UK composite output index, which measures the manufacturing and services sectors, rose to 51.7, up from November's 50.7, exceeding expectations of 51.0.

A figure above 50.0 indicates expansion, while anything below suggests contraction.

The flash services purchasing managers' business activity index also climbed to 52.7 in December, marking a six-month high.

However, the manufacturing output index dropped to 45.9 from 49.2 in November, with the manufacturing PMI at 46.4, down from 47.2 the previous month.

"The UK economy continues to dodge recession, with growth picking up some momentum at the end of the year to suggest that GDP stagnated over the fourth quarter as a whole," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

"While employment meanwhile fell for a fourth month, the decline was only marginal and not indicative of any material rise in unemployment.

"This is, however, a dual-speed economy, with manufacturing contracting sharply while services regained some poise, the latter growing faster in December thanks in part to financial services activity being buoyed by hopes of lower interest rates in 2024."

Meanwhile, according to industry forecasts released earlier, house prices in the UK were projected to face continued pressure in 2024.

Both Halifax and Nationwide anticipate a decline, with Halifax expecting a 2% to 4% fall and Nationwide predicting flat to low single-digit declines.

They both cited affordability concerns and a weaker economic outlook.

The Bank of England, which has raised interest rates 14 times since December 2021 to a 15-year high of 5.25%, has held rates steady for the last three meetings, with analysts mainly agreeing that the current rate cycle has peaked.

However, the Bank has yet to provide a clear timeline for reducing borrowing costs.

Mortgage rates, which surged last autumn, have recently started to stabilise.

At 4.6%, inflation is significantly lower than its peak of 11.1% last year but remains above the Bank of England's 2% target.

"Even though house prices are modestly lower, and incomes have been rising strongly, at least in cash terms, this hasn't been enough to offset the impact of higher mortgage rates, which are still more than three times the record lows prevailing in 2021 in the wake of the pandemic," said Robert Gardner, chief economist at Nationwide.

"There have been some encouraging signs for potential buyers recently, with mortgage rates edging down.

"Investors have become more optimistic that the BoE has already raised rates far enough to return inflation to target."

Across the Atlantic, United States industrial output rebounded less than expected in November, according to data from the Federal Reserve.

Production from factories and manufacturing increased by just 0.2%, missing the consensus estimate of 0.3%.

Manufacturing output, which constitutes 78% of total production, also grew by only 0.3%, falling short of the 0.4% expected by analysts.

Additionally, October's data was revised downward to show a 0.9% decline in output, compared to the initial estimate of -0.6%.

New York's manufacturing sector experienced a significant decline in business activity this month, according to the Empire State Manufacturing Survey by the regional Federal Reserve.

The general business conditions index plummeted 24 points to -14.5, a sharp contrast to November's +9.1.

That drop was more significant than the anticipated fall to +2.0 and below the 12-month average of -8.6.

The survey indicated that only 18% of respondents reported improved conditions, while 32% reported worsening conditions.

Turning to China, November saw industrial output grow at its fastest pace since February 2022, surpassing expectations with a 6.6% annual increase.

However, retail sales figures were weaker than expected, rising by 10.1%, as analysts had anticipated a 12.5% spike.

The discrepancy could be attributed to the stringent zero-Covid measures in place during the last quarter of 2022, leading to a lower base for comparison.

Fixed asset investment in urban areas grew by 2.9% cumulatively in the first 11 months of the year, slightly below the expected 3% growth.

St James's Place falls on capital raise plans, Trainline surges

On London's equity markets, wealth management firm St James's Place faced a 4.7% decline after it disclosed its intention to raise up to £1bn by the end of the decade to support succession plans.

The capital would be used for acquiring businesses from retiring partners.

St James's Place boasts a substantial clientele of 914,000 individuals, served through its network of 2,622 partner firms.

Energean dropped 4.57%, continuing a downward trend that began with the secondary sale of 4,422,013 of its shares by Kerogen Investments earlier in the week.

On the upside, paper and packaging group DS Smith added 2.85% after an upgrade from Bank of America Merrill Lynch.

Sector peer Mondi saw a 1.45% rise in its share price.

Travel booking platform Trainline rocketed 11.33% after the government announced a decision to abandon plans for a ticketing website and app as part of its Great British Railways proposals.

JPMorgan viewed the development as a "clear positive" for Trainline, citing the removal of concerns regarding changes in UK rail regulation and affirming the platform's strong passenger momentum and improved operational performance.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,576.36 -0.95%
FTSE 250 (MCX) 19,208.97 -0.25%
techMARK (TASX) 4,170.16 -0.78%

FTSE 100 - Risers

Spirax-Sarco Engineering (SPX) 10,300.00p 2.64%
Smith (DS) (SMDS) 309.60p 2.41%
Entain (ENT) 938.60p 2.02%
Anglo American (AAL) 1,824.00p 1.59%
Glencore (GLEN) 460.85p 1.56%
Mondi (MNDI) 1,534.50p 1.45%
Berkeley Group Holdings (The) (BKG) 4,869.00p 1.23%
BAE Systems (BA.) 1,058.00p 1.15%
Scottish Mortgage Inv Trust (SMT) 784.80p 1.13%
Airtel Africa (AAF) 121.80p 1.08%

FTSE 100 - Fallers

St James's Place (STJ) 677.60p -4.70%
Auto Trader Group (AUTO) 697.20p -4.57%
Hargreaves Lansdown (HL.) 720.60p -3.69%
Smith & Nephew (SN.) 1,044.50p -3.47%
Rolls-Royce Holdings (RR.) 290.10p -3.30%
Rightmove (RMV) 557.20p -3.10%
GSK (GSK) 1,419.20p -2.91%
Burberry Group (BRBY) 1,523.50p -2.90%
Hikma Pharmaceuticals (HIK) 1,729.50p -2.86%
Informa (INF) 764.80p -2.82%

FTSE 250 - Risers

Trainline (TRN) 316.40p 11.33%
Syncona Limited NPV (SYNC) 124.00p 5.08%
PZ Cussons (PZC) 156.40p 4.27%
W.A.G Payment Solutions (WPS) 87.40p 3.93%
Coats Group (COA) 76.20p 3.53%
Kainos Group (KNOS) 1,056.00p 3.43%
Wood Group (John) (WG.) 158.00p 3.27%
Allianz Technology Trust (ATT) 301.00p 3.26%
C&C Group (CDI) (CCR) 144.40p 3.00%
BlackRock World Mining Trust (BRWM) 569.00p 2.89%

FTSE 250 - Fallers

Indivior (INDV) 1,137.00p -7.56%
Energean (ENOG) 944.50p -4.11%
CLS Holdings (CLI) 96.00p -3.90%
Great Portland Estates (GPE) 419.00p -3.59%
Empiric Student Property (ESP) 92.70p -3.34%
TP Icap Group (TCAP) 189.50p -3.32%
Babcock International Group (BAB) 385.00p -3.17%
Harbour Energy (HBR) 224.70p -3.15%
Helios Towers (HTWS) 72.85p -3.12%
Ithaca Energy (ITH) 143.60p -2.97%