London midday: Stocks down but off lows; US debt ceiling still in focus

London stocks were still a touch weaker by midday on Thursday but off earlier lows, held back by worries about a potential US debt default and news that Germany had fallen into recession.

The FTSE 100 was down 0.1% at 7,618.64.

Richard Hunter, head of markets at Interactive Investor, said: "With the debt ceiling deadline rapidly approaching and in the absence of a resolution to the current impasse, global markets are beginning to buckle.

"Whereas the previous view had been that a deal was imminent, sentiment has shifted to reflect the unthinkable possibility of a default which would send shockwaves through the global financial system.

"Treasury Secretary Yellen added to the discomfort with her view that a potential early June default had become ‘highly likely’, with the continuing lack of progress likely to loom large in investor positioning. Quite apart from the nervousness in equities, bonds are also repricing to suggest that markets should prepare for the worst unless a last-ditch reprieve can be found."

German data added to the downbeat mood, as it showed the economy entered a technical recession in the first quarter of this year, as households tightened spending.

GDP was revised downwards to -0.3% for the first three months of the year from an initial reading of zero.

Europe’s biggest economy recorded a 0.5% contraction in the last quarter of 2022. Two consecutive quarters of negative growth mark a technical recession.

On home shores, the latest data from the Confederation of British Industry showed that retail sales dipped in the year to May following an increase in April, but retailers expect sales volumes to stabilise next month.

The CBI’s reported sales balance fell to -10 in May from +5 the month before, coming in below consensus expectations of +10.

CBI principal economist Martin Sartorius said: "Retailers continue to face a challenging trading environment, with firms reporting disappointing sales and formidable inflationary pressures. As a result, they are having to cut back on the size of their workforce and investment plans.

"Looking ahead, there are some reasons for retailers to be more optimistic about the outlook. Consumer sentiment has been improving and households’ energy bills are set to decline from July. The resulting boost to incomes should help support retail sales going into in the second half of this year."

In equity markets, ex-dividends weighed, with Kingfisher, Coca-Cola HBC, DCC, Imperial Brands, Whitbread, Diversified Energy, TI Fluid Systems and Britvic all lower.

Johnson Matthey was in the red as it reported a fall in annual profit as lower average precious metal prices and higher costs hit the bottom line.

Pets at Home lost ground even as it hailed a record full-year performance, posting a jump in underlying pre-tax profit and revenue.

On the upside, office space provider Workspace advanced despite saying that it swung to a full-year loss due to a drop in its property valuation.

Hill & Smith was a high riser as it said full-year operating profit was set to be "modestly ahead" of the top end of analyst expectations following a strong start to the year.

Food and beverage maker Tate & Lyle gained as it posted a surge in annual profits and sales, driven by higher prices on the back of soaring inflation.

Market Movers

FTSE 100 (UKX) 7,618.64 -0.11%
FTSE 250 (MCX) 18,911.13 -0.11%
techMARK (TASX) 4,603.27 0.06%

FTSE 100 - Risers

Centrica (CNA) 118.70p 4.49%
Admiral Group (ADM) 2,341.00p 2.72%
Scottish Mortgage Inv Trust (SMT) 658.60p 2.14%
Convatec Group (CTEC) 213.20p 2.01%
Flutter Entertainment (CDI) (FLTR) 15,850.00p 1.60%
HSBC Holdings (HSBA) 608.50p 1.38%
RS Group (RS1) 799.00p 1.29%
Standard Chartered (STAN) 648.80p 1.28%
Rolls-Royce Holdings (RR.) 148.70p 1.26%
Aviva (AV.) 403.80p 1.23%

FTSE 100 - Fallers

Coca-Cola HBC AG (CDI) (CCH) 2,388.00p -4.48%
Kingfisher (KGF) 232.10p -3.49%
Imperial Brands (IMB) 1,744.50p -2.92%
DCC (CDI) (DCC) 4,729.00p -2.86%
Intertek Group (ITRK) 4,232.00p -2.33%
Frasers Group (FRAS) 690.50p -2.13%
Pearson (PSON) 804.40p -1.61%
Rightmove (RMV) 525.40p -1.43%
Vodafone Group (VOD) 82.25p -1.37%
Sainsbury (J) (SBRY) 275.20p -1.33%

FTSE 250 - Risers

Workspace Group (WKP) 503.00p 5.05%
Carnival (CCL) 779.20p 4.84%
Hill and Smith (HILS) 1,414.00p 3.51%
Darktrace (DARK) 296.70p 3.16%
Polar Capital Technology Trust (PCT) 2,130.00p 3.15%
Renishaw (RSW) 3,766.00p 3.01%
Wizz Air Holdings (WIZZ) 2,926.00p 2.67%
Direct Line Insurance Group (DLG) 167.10p 2.64%
Allianz Technology Trust (ATT) 244.00p 2.31%
Bridgepoint Group (Reg S) (BPT) 216.40p 1.98%

FTSE 250 - Fallers

Tritax Eurobox (GBP) (EBOX) 59.90p -4.92%
Diversified Energy Company (DEC) 90.30p -3.83%
Grainger (GRI) 247.80p -3.58%
Centamin (DI) (CEY) 101.10p -3.35%
Big Yellow Group (BYG) 1,121.00p -3.20%
Synthomer (SYNT) 103.40p -3.18%
Future (FUTR) 789.50p -2.95%
IP Group (IPO) 56.00p -2.95%
Currys (CURY) 52.55p -2.69%
UK Commercial Property Reit Limited (UKCM) 51.80p -2.63%