London close: Stocks weaker on dark day for sterling

Stocks closed weaker alongside a big drop in the pound on Thursday, taking the currency to levels not seen since the ‘Black Wednesday’ currency crisis in 1992.

The FTSE 100 ended the session down 0.62% at 7,236.68, and the FTSE 250 was 0.47% weaker at 18,797.14.

Sterling was last down 0.64% against the dollar at $1.1394, and slid 0.68% on the euro to €1.1389.

“There has been no end to the bearish moves of the past few days, with the final session in the red following a trio of warnings about the global economy,” said IG chief market analyst Chris Beauchamp.

“The IMF, the World Bank and FedEx have all given investors reason to worry, and investors have opted to continue their flight from equities.

“Given that the Fed is expected to renew its pledge of tighter policy next week, and inflation shows no sign of slowing, these warnings may actually be on the optimistic side, suggesting the actual outcome for global markets may be worse.”

Beauchamp said that while the pound touched a fresh two-year low earlier, it was “trying hard” to finish the day above $1.14.

“If it does, it might be that we have seen an end to the selling for now.

“But as with equities, the outlook will struggle to get much brighter, even if the Bank of England opts for a 75-basis point move next week.”

In economic news, UK retail sales fell sharply last month hit by rising prices and the ensuing cost-of-living crisis.

According to the Office for National Statistics, total sales volumes fell at a seasonally-adjusted month-on-month pace of 1.6% in August - more than the 1.4% drop economists had pencilled in, and following a rise of 0.4% in July.

It was a similar story in year-on-year terms with sales down by 5.4%, versus a 3.4% decline in July and wider than consensus expectations for a 3.7% weakening.

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, linked the drop in sales to the "extremely low" level of consumer confidence, adding that it should steer the Monetary Policy Committee towards a 50-basis point hike in Bank Rate.

That was in contrast to the 75-basis point hike seen as most likely by financial markets.

Across the pond, US consumer confidence improved slightly in early September despite signs of uncertainty regarding the outlook for economic growth, according to a closely-followed survey.

Long-run inflation expectations, however, improved.

The University of Michigan's consumer sentiment index improved in early September to 59.5, from August's reading of 58.2 and against expectations for 59.3.

“After the marked improvement in sentiment in August, consumers showed signs of uncertainty over the trajectory of the economy,” noted survey director Joanne Hsu.

Finally on data, economic growth in China held up slightly better than expected in August.

That was due in part to support from government policies, which helped offset some of the drag from Covid-19 restrictions and power shortages during the recent heat wave, according to analysts at Capital Economics.

Fresh home price declines had also weighed on consumer sentiment.

According to the National Bureau of Statistics, growth in retail sales, industrial production and fixed asset investment in China all surprised to the upside in August.

The annual rate of increase in the former accelerated to 5.4% from 2.7% in July, ahead of the expected 3.2%, while industrial output hastened to 4.2% from 3.8%, compared to consensus expectations for 3.8%.

Year-to-date fixed capital investment, meanwhile, was up 5.8% year-on-year, just ahead of the 5.5% markets were anticipating.

On London’s equity markets, shares in AstraZeneca slipped 0.08% even after the company and its partner Sanofi said their ‘Beyfortus’ drug for the prevention of lower respiratory tract disease in newborns and infants had been recommended for marketing authorisation in the European Union.

If approved, Beyfortus would be the first and only single-dose passive immunisation for the broad infant population, including those born healthy, at term or preterm, or with specific health conditions.

The pharma giant also said separately that its Danicopan add-on anti blood-clotting drug had met a primary endpoint in a phase 3 trial.

Elsewhere, mining stocks were hit by fears of a global slowdown after a warning from the World Bank that a recession was looming.

Glencore was down 2.53% and Fresnillo was off 0.16% as a result.

Royal Mail tumbled 8.08%, with the stock being hammered by negative read-across from US peer FedEx's decision to withdraw its full-year guidance after Thursday's close.

America's express mail giant also guided analysts towards fiscal first quarter profits of $3.44 on sales of $23.3bn, compared to consensus forecasts from FactSet for $5.14 and $23.6bn, respectively.

The sell-off in Darktrace continued, with the firm down 7.51% after US private equity firm Thoma Bravo walked away from a potential takeover of the British artificial intelligence and cybersecurity company.

On the upside, bus operator National Express was ahead 4.23%, continuing to benefit from the company's ticket-booking deal with taxi app Uber, which was looking to expand into coach and train travel.

Reporting by Josh White at Sharecast.com. Additional reporting by Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,236.68 -0.62%
FTSE 250 (MCX) 18,797.14 -0.47%
techMARK (TASX) 4,222.65 -0.45%

FTSE 100 - Risers

Ocado Group (OCDO) 663.80p 3.23%
M&G (MNG) 201.20p 2.00%
Hikma Pharmaceuticals (HIK) 1,253.50p 1.79%
Barratt Developments (BDEV) 429.20p 1.13%
Aveva Group (AVV) 3,052.00p 0.89%
Prudential (PRU) 957.60p 0.72%
SEGRO (SGRO) 883.40p 0.68%
SSE (SSE) 1,740.00p 0.55%
Sainsbury (J) (SBRY) 204.10p 0.55%
Hargreaves Lansdown (HL.) 853.20p 0.47%

FTSE 100 - Fallers

InterContinental Hotels Group (IHG) 4,670.00p -4.67%
Dechra Pharmaceuticals (DPH) 2,950.00p -4.47%
Smith (DS) (SMDS) 265.50p -3.31%
Spirax-Sarco Engineering (SPX) 10,095.00p -2.99%
Schroders (SDR) 2,518.00p -2.63%
Compass Group (CPG) 1,875.00p -2.62%
Glencore (GLEN) 489.30p -2.53%
DCC (CDI) (DCC) 4,717.00p -2.44%
Airtel Africa (AAF) 135.80p -2.30%
JD Sports Fashion (JD.) 125.65p -2.26%

FTSE 250 - Risers

IWG (IWG) 143.45p 5.83%
Jupiter Fund Management (JUP) 108.30p 5.66%
FirstGroup (FGP) 125.00p 5.49%
Provident Financial (PFG) 188.00p 5.08%
Hammerson (HMSO) 22.00p 4.96%
Marshalls (MSLH) 336.60p 4.51%
National Express Group (NEX) 194.50p 4.23%
Currys (CURY) 65.20p 3.90%
Sirius Real Estate Ltd. (SRE) 82.10p 3.79%
Telecom Plus (TEP) 1,794.00p 3.70%

FTSE 250 - Fallers

Royal Mail (RMG) 231.70p -8.08%
Darktrace (DARK) 353.70p -7.51%
Syncona Limited NPV (SYNC) 172.80p -6.80%
XP Power Ltd. (DI) (XPP) 1,804.00p -6.63%
Greencore Group (CDI) (GNC) 82.25p -4.69%
Wizz Air Holdings (WIZZ) 1,983.50p -4.55%
Abrdn Private Equity Opportunities Trust (APEO) 414.00p -4.39%
Discoverie Group (DSCV) 723.00p -4.23%
Network International Holdings (NETW) 293.40p -4.12%
WH Smith (SMWH) 1,414.00p -3.65%