London midday: Stocks extend losses after UK GDP, US inflation data

London stocks had fallen further into the red by midday on Monday as investors mulled hotter-than-expected US inflation data and an unexpected contraction in UK GDP.

The FTSE 100 was down 1.7% at 7,192.43, while the pound was down 0.8% against the dollar at 1.2211 after data from the Office for National Statistics showed the economy shrank by 0.3% in April amid higher prices and supply chain issues following a 0.1% decline in March. Analysts had been expecting 0.1% growth.

For the first time since January 2021, contractions were seen in services, production and construction.

The ONS pinned some of the blame for the contraction in GDP to the scaling back of the government’s Covid Test and Trace and jab programmes.

ONS director of economic statistics, Darren Morgan, said: "A big drop in the health sector due to the winding down of the test and trace scheme pushed the UK economy into negative territory in April.

"Manufacturing also suffered with some companies telling us they were being affected by rising fuel and energy prices.

"These were partially offset by growth in car sales, which recovered from a significantly weaker than usual March."

A rate announcement is due from the BoE on Thursday.

Russ Mould, investment director at AJ Bell, said: "The mood out there is pretty grim, with the relief rally seen in late May starting to feel like a distant memory. You know things are bad when the best performer among the UK’s top stocks is precious metal producer Fresnillo as investors reach for traditional safe havens.

"The hangover from a higher than expected US inflation reading is continuing to cause scissoring pain throughout the markets, as it extinguishes the hope the US Federal Reserve might be able to take its foot off the pedal on interest rate rises.

"The FTSE 100’s relative resilience today is supported by its bevy of exporters, whose overseas earnings are boosted by the falling pound - the currency is in freefall as a shock drop in GDP raises fears of a recession.

"Background factors like the ending of the test and trace programme contributed to the weak figures but there was barely room for encouragement with most parts of the economy performing worse than expected.

"Investors are likely to remain jittery at least until the Fed has delivers its verdict on rates on Wednesday, with the Bank of England following suit a day later."

Elsewhere, fresh Covid lockdowns in China were also weighing on sentiment. Richard Hunter, head of markets at Interactive Investor, said: "With easing restrictions only having been announced over the last few days, inevitably the news prompted concerns that demand and indeed consumer confidence would suffer a fresh blow, thus adding to the cocktail of factors which could inhibit global growth."

In equity markets, mining stocks - which are cyclical - were among the worst performers on the FTSE 100, with Glencore, Antofagasta, Anglo American and Rio Tinto all lower.

On the upside, Go-Ahead surged after the transport operator said it had received two separate takeover approaches at a price it would be minded to recommend if offers were made. Approaches were made by Australian transport service provider Kelsian Group and by a consortium consisting of Kinetic Holding Company and Globalvia Inversiones.

National Express was also trading up.

Market Movers

FTSE 100 (UKX) 7,192.43 -1.71%
FTSE 250 (MCX) 19,263.31 -2.08%
techMARK (TASX) 4,232.28 -1.19%

FTSE 100 - Risers

Fresnillo (FRES) 787.20p 5.18%
Melrose Industries (MRO) 155.80p 0.94%
Vodafone Group (VOD) 126.52p 0.84%
United Utilities Group (UU.) 1,052.50p 0.62%
HSBC Holdings (HSBA) 501.00p 0.38%
BT Group (BT.A) 178.70p 0.31%
Severn Trent (SVT) 2,892.00p 0.28%
Pearson (PSON) 742.60p 0.27%
Smith (DS) (SMDS) 290.40p 0.24%
Avast (AVST) 484.20p 0.10%

FTSE 100 - Fallers

Glencore (GLEN) 478.80p -5.28%
Antofagasta (ANTO) 1,362.50p -4.92%
Scottish Mortgage Inv Trust (SMT) 710.80p -4.69%
InterContinental Hotels Group (IHG) 4,478.00p -4.34%
Anglo American (AAL) 3,461.50p -4.19%
Barratt Developments (BDEV) 475.40p -3.86%
Sainsbury (J) (SBRY) 205.50p -3.66%
Entain (ENT) 1,357.00p -3.66%
Rio Tinto (RIO) 5,495.00p -3.43%
Dechra Pharmaceuticals (DPH) 3,242.00p -3.34%

FTSE 250 - Risers

National Express Group (NEX) 222.00p 4.32%
Euromoney Institutional Investor (ERM) 1,124.00p 4.07%
Mitie Group (MTO) 64.60p 2.54%
BH Macro Ltd. GBP Shares (BHMG) 4,475.00p 1.82%
ContourGlobal (GLO) 253.00p 1.40%
Darktrace (DARK) 353.00p 0.86%
Johnson Matthey (JMAT) 2,056.00p 0.83%
Apax Global Alpha Limited (APAX) 201.50p 0.75%
The Renewables Infrastructure Group Limited (TRIG) 137.80p 0.73%
Vivo Energy (VVO) 144.00p 0.70%

FTSE 250 - Fallers

Ferrexpo (FXPO) 146.80p -10.65%
Drax Group (DRX) 628.50p -6.75%
Hammerson (HMSO) 23.49p -6.38%
Oxford Biomedica (OXB) 458.00p -5.76%
Aston Martin Lagonda Global Holdings (AML) 577.00p -5.69%
Ascential (ASCL) 283.80p -5.53%
Helios Towers (HTWS) 121.60p -5.22%
SSP Group (SSPG) 231.30p -5.20%
Trustpilot Group (TRST) 82.65p -5.11%
Blackrock Throgmorton Trust (THRG) 563.00p -5.06%