London close: Stocks weaker on rate hikes, mixed data

Stocks in London closed lower on Thursday, as investors processed mixed economic data from both sides of the Atlantic.

Sentiment was dampened from the start of trading by the US Federal Reserve's decision to increase interest rates by 25-basis points overnight, although the central bank did hint that it could pause future hikes.

The FTSE 100 fell 1.1% to close at 7,702.64, while the FTSE 250 declined 0.62% to finish at 19,244.91.

In currency markets, sterling made gains against both the dollar and the euro, to last trade up 0.06% at $1.2571, and gain 0.56% to change hands at €1.1422.

“The Fed and the ECB might go on merrily hiking rates, but the renewed crisis in US regional banks is the main reason for the firmly ‘risk-off’ tone to today’s session,” said IG chief market analyst Chris Beauchamp.

“Other US banks are coming under heavy pressure, threatening once again to upend the stability of the US financial system less than a day after Jerome Powell pronounced it healthy.”

UK services see faster growth, ECB joins in on rate hikes

In economic news, the UK's service sector experienced its quickest growth in a year in April, according to data from the S&P Global/CIPS purchasing managers’ index (PMI), which rose to 55.9 from 52.9 in March.

That exceeded the initial estimate of 54.9 and represented the fastest growth rate since April last year.

Consumer spending, particularly in travel, tourism, and leisure sub-sectors, was cited as a key driver of business activity.

Despite intense cost inflation, demand for business services also improved.

Additionally, the composite PMI rose to 54.9 in April from 52.2 the previous month, exceeding the initial estimate of 53.9.

“A strong rate of service sector growth meant that the UK economy started the second quarter of 2023 in positive fashion,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Overall private sector output expanded at the fastest pace for one year, despite another fall in manufacturing production during April.”

Elsewhere, mortgage approvals surged in March according to the Bank of England's latest money and credit report.

Net approvals rose to 52,000 from 44,100 in February, with the effective interest rate paid on newly drawn mortgages increasing by 17 basis points to 4.41%.

That suggested the UK housing market was stabilising, even though mortgage lending to individuals fell to a net flow of zero - the lowest level outside of the pandemic since June 2011.

“Households and businesses have become less willing to hold bank deposits since the collapse of Silicon Valley Bank on 10 March,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“In addition, the £3.5bn rise in cash in NS&I accounts show that some households have shifted savings to benefit from a full government guarantee, as opposed to only the £85,000 protection offered to bank depositors.

“So funding conditions for banks have deteriorated, suggesting they likely will increase interest rates for both deposits and new loans over the coming months to steady the ship.”

In the UK's new car market, April saw continued growth in registrations for the ninth consecutive month, rising 11.6% to reach 132,990.

Fleet registrations increased by 33.1% to 68,537 units, while the number of deliveries to private buyers dropped by 5.5% to 61,342 units.

On the continent, meanwhile, the European Central Bank raised interest rates again, stating that the inflation outlook was still too high for too long, although the governing council added that it would continue to act in a data-dependent manner due to uncertainties in policy transmission.

While headline consumer prices slowed in recent months, it said inflation pressures at the core level remained strong.

Across the pond, US jobless claims increased moderately last week, rising to 242,000 from 229,000.

The four-week moving average fell by 1,000 to 229,000.

Additionally, a measure of price pressures emanating from the US job market rose beyond expectations in the first quarter, with unit labour costs increasing by 6.3% in seasonally-adjusted terms, up from economist forecasts of 5.6%.

Finally on data, Chinese factory activity, as measured by the Caixin manufacturing PMI, fell to 49.5 in April from 50 in March, indicating a contraction in factory output for the first time since January.

Trainline surges ahead while ex-divs prove a drag

On London’s equity markets, St James's Place, Glencore, Hiscox, and Admiral Group all fell as they traded without entitlement to the dividend, with St James's Place seeing the steepest decline of 5.4%.

BAE Systems also lost ground, falling 2.23% despite reporting a good operational performance.

Virgin Money UK was hit by 3.89% after it reported lower first-half profit due to an increase in impairment charges for bad debts and higher investment costs.

On the upside, Hargreaves Lansdown rallied 1.09% after a well-received first-quarter update, while clothing and homeware retailer Next rose 2.84% after it backed full-year guidance and posted a smaller-than-expected drop in first-quarter sales.

Oil giant Shell gained 0.86% after beating forecasts to post a first-quarter net profit of $9.65bn, although down 2% year-on-year due to lower oil and gas prices.

Trainline surged 12.97% after reporting a recovery in full-year sales and profits, driven by a rebound in UK consumer and international consumer net ticket sales.

Elsewhere, construction group Morgan Sindall was 4.13% firmer after it held annual guidance, and said that general market conditions coming into 2023 had continued to ease, with inflation falling in certain areas.

IMI added 2.63% after it lifted its full-year earnings per share guidance, following a strong performance in the first quarter.

In an update for the three months to the end of March, the company said it now expected earnings per share of between 112p and 117p.

Reporting by Josh White for Sharecast.com.

FTSE 100 -85.73 (-1.10%) 7,702.,64

RISERS
Next +3.19% 6,722p
Coca-Cola HBC +1.45% 2,519p
Hikma Pharma +1.41% 1,869p
Halma +1.27% 2,388p
SSE +1.2% 1,857.5p
Severn Trent +1.16% 2,969p
Hargreaves Lansdown +1.09% 800.4p
National Grid +1.05% 1,155.5p
United Utilities +0.97% 1,090p
Croda International +0.92% 6,796p

FALLERS
St James’s Place -6.46% 1,108p
Glencore -6.12% 434p
Informa -4.46% 680.6p
WPP -4.13% 864.2p
Experian -4.03% 2,690p
Phoenix -3.54% 566.2p
Barclays -3.27% 148.24p
Legal & General -3.24% 224.1p
Relx -2.93% 2,450p
Prudential -2.81% 1,159p

FTSE 250 -120.69 (-0.62%) 19,244.91

RISERS
Trainline +12.97% 270p
IMI +2.62% 1,642p
HgCapital +2.34% 349.5p
Harbour Energy +2.18% 238.7p
Genuit Group +1.81% 309.5p
Oxford Instruments +1.64% 2,795p
IntegraFin +1.55% 288p
AG Barr +1.54% 528p
Workspace +1.52% 482p
Genus +1.51% 2,692p

FALLERS
Petrofac -8.49% 68.45p
Cineworld -8.07% 0.86p
Moneysupermarket.com -5.56% 264.8p
Future -5.08% 1,066p
RS Group -4.28% 849.4p
Direct Line Insurance -3.9% 161.25p
Virgin Money UK -3.88% 147.2p
Vanquis Banking -3.79% 216p
Renewables Infrastructure Group -3.54% 125.4p
Blackrock World Mining -3.23% 629p