London midday: FTSE and sterling slide amid political uncertainty, disappointing data

London stocks had fallen further by midday on Friday, sterling was sharply lower against the dollar and government bond yields were rising again amid political uncertainty, as data showed that retail sales slumped and government borrowing leapt in September.

The FTSE 100 was 0.9% lower at 6,882.08, while the pound was down 1.2% against the dollar at 1.1106, having briefly rallied a day earlier after Liz Truss threw in the towel, becoming the shortest-serving prime minister in UK history as she resigned after just 45 days in office.

Penny Mordaunt, Rishi Sunak and comeback kid Boris Johnson are all contenders to replace her.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "With the third Prime Minister in just a year expected to be announced by the end of the month, the UK will still be viewed in financial markets as politically unstable.

"What investors crave is more steadiness and reliability but until they know who will take charge and lead an economic recovery, that stability still remains highly elusive which means that neither sterling nor stocks are likely to make any big strides of progress."

Politics aside, investors were mulling the latest data from the Office for National Statistics, which showed that retail sales tumbled in September, weighed down by soaring prices, the cost-of-living crisis and the state funeral of Queen Elizabeth II.

Sales volumes fell 1.4% in September, making them 1.3% below February 2020, pre-Covid. Analysts had been expecting a decline of around 0.5%.

The ONS said retailers blamed rising prices and the cost-of-living squeeze for the fall in sales, with the data further affected by the bank holiday for the late queen’s funeral, when many shops were closed.

In the three months to September, sales volumes were down by 2.0% when compared to the previous three month-period, extending a downward trend that started in summer 2021.

Year-on-year, sales volumes fell 5.4% over the same period, while sales values spiked 5.5%.

The ONS also revised August’s fall in sales volumes, to 1.7% from 1.6%.

Alongside the retail sales data, the ONS also published figures showing a steep increase in government borrowing in September. Public sector net borrowing excluding public sector banks (PSNB ex) was £20bn last month, £2.2bn up on the same month a year previously and the second-highest September since records began in 1993.

In the financial year to September 2022, PSNB ex was £72.5bn, £24.9bn less than in the same period last year but £35.6bn more than in the financial year to September 2019, pre-Covid.

Public sector net debt excluding public sector banks stood at £2.45trn as at the end of September, around 98% of GDP. That was an increase of £213bn, or 2.5 percentage points of GDP, compared to September 2021.

Richard Hunter, head of markets at Interactive Investor, said: "With the latest figures indicating a drop in retail sales and a further increase in government borrowing, the intense pressure will remain on not just the economy itself, but also for the country as an investment destination which had been showing some signs of life and overseas interest earlier in the year."

The latest GfK survey did little to help the mood either, as it showed consumer confidence edged higher in October but remained at historic lows.

The GfK consumer confidence index increased by two points to -47, after three measures rose, including both the personal financial situation and general economic situation for the next 12 months. They rose by 6 points to -34, and by 7 points to -61, respectively.

However, the overall index remained close to September’s historic low of -49, the weakest since the survey was launched in 1974.

Joe Staton, client strategy director at GfK, said: "Households are not just running scared of burgeoning energy and food prices, and the prospect of further base rate rises increasing mortgage costs. They are now facing the likelihood of tax rises and even austerity measures.

"For ordinary consumers, this web of uncertainty and turmoil amounts to a new abnormal."

In equity markets, retailers were under the cosh after the ONS data, with JD Sports, Frasers Group, Ocado, Next and B&M European Value Retail all lower.

Hotels chain IHG slumped even as it reported a rise in third-quarter hotel room revenue, driven by strong demand as business and leisure travel recovered from the Covid pandemic. The company also said chief financial officer Paul Edgecliffe-Johnson will step down in six months to join gambling group Flutter.

Components maker Essentra lost ground despite saying it expects annual results to be in line with expectations after a 11% rise in third-quarter like-for-like sales.

Market Movers

FTSE 100 (UKX) 6,882.08 -0.89%
FTSE 250 (MCX) 17,086.63 -1.74%
techMARK (TASX) 4,108.21 -0.44%

FTSE 100 - Risers

Pershing Square Holdings Ltd NPV (PSH) 2,780.00p 0.91%
BAE Systems (BA.) 816.40p 0.86%
Haleon (HLN) 273.80p 0.85%
GSK (GSK) 1,375.80p 0.79%
Unilever (ULVR) 3,919.00p 0.24%
Aveva Group (AVV) 3,154.00p 0.13%
Shell (SHEL) 2,322.50p 0.11%
Flutter Entertainment (CDI) (FLTR) 10,730.00p 0.09%
Entain (ENT) 1,177.50p 0.08%
AstraZeneca (AZN) 9,659.00p 0.03%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 92.82p -7.46%
Auto Trader Group (AUTO) 487.40p -5.94%
Frasers Group (FRAS) 610.00p -5.72%
InterContinental Hotels Group (IHG) 4,368.00p -4.27%
Next (NXT) 4,693.00p -3.77%
Kingfisher (KGF) 199.20p -3.77%
B&M European Value Retail S.A. (DI) (BME) 298.40p -3.37%
Ocado Group (OCDO) 477.30p -3.36%
Rentokil Initial (RTO) 493.10p -3.35%
Airtel Africa (AAF) 121.70p -3.26%

FTSE 250 - Risers

Synthomer (SYNT) 102.20p 3.23%
Hipgnosis Songs Fund Limited NPV (SONG) 86.00p 2.14%
Rathbones Group (RAT) 1,800.00p 1.35%
Network International Holdings (NETW) 326.20p 0.99%
Bytes Technology Group (BYIT) 409.80p 0.74%
PZ Cussons (PZC) 188.00p 0.64%
Jlen Environmental Assets Group Limited NPV (JLEN) 115.80p 0.52%
JPMorgan Indian Investment Trust (JII) 822.00p 0.24%
Jupiter Fund Management (JUP) 97.35p 0.21%
Foresight Solar Fund Limited (FSFL) 109.00p 0.18%

FTSE 250 - Fallers

Future (FUTR) 1,203.00p -7.32%
ASOS (ASC) 499.40p -7.00%
Aston Martin Lagonda Global Holdings (AML) 100.55p -6.12%
Darktrace (DARK) 344.90p -5.64%
International Distributions Services (IDS) 190.10p -5.47%
Vietnam Enterprise Investments (DI) (VEIL) 546.00p -5.04%
Just Group (JUST) 58.60p -4.87%
Pets at Home Group (PETS) 268.20p -4.83%
Trainline (TRN) 297.20p -4.80%
Ibstock (IBST) 153.00p -4.79%