London close: Stocks weaker as investors eye US tech earnings

London's stock markets were still lower by the close on Tuesday, as investors looked ahead to key earnings reports from some of America’s largest tech names.

The FTSE 100 ended the day down 0.27% at 7,891.13, while the FTSE 250 slipped 0.06% to 19,215.39.

Investors were keeping a close eye on Google owner Alphabet, Amazon, Facebook parent Meta, and Microsoft, with all scheduled to report this week.

Earlier in the day, the latest UK government borrowing figures showed a continued rise through March.

Sterling was also in the red, last trading down 0.71% on the dollar at $1.2397, and slipping 0.01% against the euro to change hands at €1.1302.

“Investors continue to trim exposure to stocks as this week’s earnings barrage gets underway,” said IG chief market analyst Chris Beauchamp.

“UPS’ forecast of a weaker economy is just the kind of warning investors don’t want to hear, and has likely prompted a round of selling on renewed recession fears.

“With so much riding on this week’s figures, caution is still the watchword.”

Government borrowing rises in March, food prices still rising

In economic news, data from the Office for National Statistics (ONS) showed UK government borrowing rising again in March, reaching £21.5bn.

It came in slightly higher than the predicted £21.3bn, and represented the second-highest borrowing figure since monthly records began in 1993.

The energy support scheme was identified as a factor in the increase.

For the financial year ended 31 March, borrowing was estimated to be £139.2bn - a rise of £18.1bn on the previous year, and the fourth-highest on record, accounting for 5.5% of GDP.

“These numbers reflect the inevitable consequences of borrowing eye-watering sums to help families and businesses through a pandemic and Putin's energy crisis,” said chancellor Jeremy Hunt.

“We were right to do so because we have managed to keep unemployment at a near-record low and provided the average family more than £3,000 in cost of living support this year and last.

“We stepped up to support the British economy in the face of two global shocks, but we cannot borrow forever.”

Elsewhere, the latest CBI industrial trends survey showed a decline in output across the UK manufacturing sector over the last three months, with a sharp drop in output volumes from -6 to -15, making for the lowest reading since July 2020.

13 of the 17 sub-sectors reported a decline, with motor vehicles and transport equipment being the most affected.

Although the measure of stocks of finished goods rose to +19, total order books had a balance of -20.

Total new orders remained stable at -3, while costs rose at the slowest pace since April 2021, with a balance of +50 compared to +64 in January.

“April’s survey provides some early signs that the downturn in the manufacturing sector is starting to bottom out,” said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics.

“Manufacturers were the most upbeat about the outlook for demand since the fourth quarter of 2021.

“Consumer demand has been more resilient than widely expected six months ago, and will be supported over the coming months by the recent 10.1% increase in benefits and a sharp fall in energy prices.”

Grocery price inflation saw a marginal decrease in April, down from an all-time high of 17.5% to 17.3% in the four weeks to 16 April, according to industry data from Kantar.

However, the consultancy firm noted that it did not believe the rate of inflation had peaked, as it remained in double digits for 10 consecutive months.

“The latest drop in grocery price inflation will be welcome news for shoppers, but it’s too early to call the top,” said Fraser McKevitt, Kantar’s head of retail and consumer insight.

“We’ve been here before, when the rate fell at the end of 2022 only for it to rise again over the first quarter of this year.

“We think inflation will come down soon, but that’s because we’ll start to measure it against the high rates seen last year.”

Across the pond, the S&P-CoreLogic Case-Shiller national house price index revealed a slower rate of house price growth in the US in February, with an annual pace of 2.0% compared to the 3.7% observed in January.

The figure was in line with economists' expectations from Bank of America, indicating a moderation in price growth.

Miners and banks pace decline, Whitbread jumps on strong hotel demand

On London’s equity markets, miners and banks were among the worst performing equities with Rio Tinto Group, Glencore, and Anglo American down by 3.04%, 3.57%, and 3.42%, respectively.

Banks, including Standard Chartered, NatWest Group, HSBC Holdings, and Lloyds Banking Group, also saw declines following disappointing results from ailing US regional bank First Republic.

Primark parent Associated British Foods was down 4.15% after reporting lower interim profits due to inflationary headwinds and lower consumer spending amid the cost-of-living crisis.

Builders’ merchant Travis Perkins was 2.79% lower, despite holding annual guidance despite a tough first quarter for the house building market.

WAG Payment Solutions, or Eurowag, reversed earlier gains to lose 1.67% by the close, despite a well-received first-quarter trading update.

On the upside, Premier Inn owner Whitbread surged 4.25% after reporting strong demand for hotel rooms and announcing a £300m share buyback, which led to pre-tax profit of £375m.

Watches of Switzerland Group rocketed 7.68% after reports of takeover speculation.

Vodafone Group added 1.78% after its largest shareholder e& lifted its stake in the firm, and opened talks to push for changes to its board.

Quilter increased 2.86% after it reported a modest rise in assets under management and administration (AuMA) in the first quarter.

Reporting by Josh White for Sharecast.com.