London midday: Risk appetite hammered by mixed data, Middle East fears

UK equities were a sea of red on Tuesday with just six stocks on the FTSE 100 in positive territory, as a barrage of mixed economic data and rising concerns about conflict in the Middle East hammering market sentiment.

Financials, industrials and mining stocks dominated the fallers lists, while shares in the utilities and healthcare sectors held up well, as investors shook off 'riskier' investments in search of safe havens.

By the midday mark, the FTSE 100 was down 1.4% at 7,857, trading at levels not seen since 20 March.

Tensions in the Middle East were high after Israel said it had no choice but to respond to Iran's 300-plus missiles and drones that were launched at the weekend. The initial muted reaction to Tehran's attack had a similarly subdued impact on the markets on Monday, though fears are now rising of a reprisal. "Missiles into the territory of the State of Israel will be met with a response," said Herzi Halevi, chief of staff of the IDF.

Meanwhile, markets were reacting yet more strong economic data from the US on Monday, with retail sales rising more than expected in March, prompting some to push back their projections for interest-rate cuts even further in light of a resilient economy. Wall Street stocks fell on Monday with 10-year US Treasury yields rising back to levels not seen since November 2023 at around the 4.65% mark.

"Sentiment is shaky at best right now with heightened geopolitical tensions in the Middle East coming alongside increased concerns that the Federal Reserve may opt to maintain interest rates at the current levels for some time yet," said Joshua Mahony, chief market analyst at Scope Markets.

Data comes in mixed

Asian markets dropped sharply overnight, with the Nikkei 225 and Hang Seng both dropping 2% each, after economic data from China underwhelmed. GDP figures for the first quarter beat expectations, with annual growth rising to 5.3% from 5.2%, but standalone data for March showed that growth had started to tail off by the end of the quarter.

Chinese retail sales rose by just 3.1% year-on-year in March after 5.5% growth in February, while industrial production growth slowed to 4.5% from 7.0% – with both figures missing economists' expectations.

Back on home soil, the UK unemployment rate jumped to 4.2% in the three months to February, from an upwardly revised 4.0% in the three months to January, ahead of the 4.0% forecast by the market. However, pay growth was resilient, showing the average earnings growth (excluding bonuses) remained high at 6.0% in February, down just 10 basis points over the month after a particularly strong January.

“Hopes of a May interest rate cut had always appeared to rest on there being a significant downside movement in the February data for pay growth or inflation," said Andrew Goodwin, senior economic advisor to the EY ITEM Club. "Therefore, today's surprisingly strong outturn for pay growth reduces the chances of a May move."

Meanwhile, the ZEW economic sentiment survey for the eurozone improved to 43.9 in April from 33.5 in March, surpassing the 37.2 mark expected by economists, helped by German confidence reaching a two-year high.

Market movers

Reduced risk appetite was benefitting the utilities and healthcare sectors, with Centrica, Severn Trent, SSE and United Utilities among the handful of stocks on the rise, along with Smith & Nephew and Croda International.

Heading the other way were financial and mining stocks, such as Pershing Square Holdings, Phoenix Group, Prudential, Anglo American, Glencore and Rio Tinto.

Shares in Dr Martens plummeted 29% after the bootmaker announced chief executive Kenny Wilson has decided to step down as it issued another profit warning for the current financial year amid continuing woes in the US, its biggest market. The company warned "we could see a worst-case scenario of profit-before-tax of around one-third of the 2024 level".

QinetiQ Group fell 6% after announcing Carol Borg's departure as group chief financial officer, effective immediately, with Martin Cooper appointed as her successor, expected to join by October.

DS Smith slipped 2% after announcing that US rival International Paper has agreed to buy the company in a £7.8bn all-share deal. The deal dwarfs an earlier offer from UK peer Mondi, which had agreed an all-share takeover worth around £6.2bn in March, shortly before International Paper launched its own approach.

Market Movers

FTSE 100 (UKX) 7,856.71 -1.37%
FTSE 250 (MCX) 19,411.08 -1.46%
techMARK (TASX) 4,407.67 -1.27%

FTSE 100 - Risers

Smith & Nephew (SN.) 978.00p 2.02%
Centrica (CNA) 132.60p 1.61%
Croda International (CRDA) 4,823.00p 1.13%
Severn Trent (SVT) 2,404.00p 1.01%
SSE (SSE) 1,658.50p 0.52%
United Utilities Group (UU.) 1,009.50p 0.30%

FTSE 100 - Fallers

Pershing Square Holdings Ltd NPV (PSH) 3,830.00p -4.35%
Scottish Mortgage Inv Trust (SMT) 834.00p -3.72%
Anglo American (AAL) 2,094.50p -3.43%
Auto Trader Group (AUTO) 673.40p -2.86%
IMI (IMI) 1,749.00p -2.83%
Phoenix Group Holdings (PHNX) 494.20p -2.81%
Beazley (BEZ) 655.00p -2.75%
Prudential (PRU) 690.20p -2.73%
Rio Tinto (RIO) 5,264.00p -2.70%
Glencore (GLEN) 468.90p -2.65%

FTSE 250 - Risers

Savills (SVS) 1,064.00p 3.70%
Octopus Renewables Infrastructure Trust (ORIT) 71.00p 2.90%
Plus500 Ltd (DI) (PLUS) 2,014.00p 1.77%
Bakkavor Group (BAKK) 116.50p 1.30%
Wood Group (John) (WG.) 142.20p 1.28%
Centamin (DI) (CEY) 127.80p 1.19%
NB Private Equity Partners Ltd. (NBPE) 1,668.00p 0.85%
Harbour Energy (HBR) 295.00p 0.82%
Endeavour Mining (EDV) 1,724.00p 0.70%
Syncona Limited NPV (SYNC) 123.00p 0.65%

FTSE 250 - Fallers

Dr. Martens (DOCS) 67.30p -29.12%
Auction Technology Group (ATG) 535.00p -14.13%
QinetiQ Group (QQ.) 335.20p -6.32%
TUI AG Reg Shs (DI) (TUI) 577.50p -5.94%
Hays (HAS) 88.55p -4.27%
International Distributions Services (IDS) 218.80p -3.70%
Oxford Instruments (OXIG) 2,015.00p -3.59%
Ferrexpo (FXPO) 45.65p -3.49%
Vesuvius (VSVS) 475.00p -3.36%
Aston Martin Lagonda Global Holdings (AML) 152.60p -3.36%