London midday: Stocks fall further as investors eye OPEC meeting, mull Truss speech

London stocks had extended losses by midday on Wednesday following three days of gains, as investors mulled the latest reading on UK business activity and looked ahead to an OPEC+ meeting on supply.

The FTSE 100 was down 1.1% at 7,053.89, while sterling was 0.9% weaker versus the dollar at 1.1374.

Earlier, prime minister Liz Truss walked on stage at the Tory party conference in Birmingham to the sound of M People’s "Moving On Up". Sporting a red dress seemingly inspired by iconic Disney villain Cruella De Vil, Truss insisted that the Tory party "will always be the party of low taxes".

She defended the government’s tax cuts, saying they were good for economic growth, and that "we must always be careful with taxpayers’ money". She also noted that the UK is in "extraordinary times" and said the government will bring down debt as a proportion of national income.

Investors were also looking ahead to an OPEC+ supply meeting, following speculation of a large output cut in response to a dimming economic outlook and lower price.

Oanda market analyst Craig Erlam said: "Last month's warning shot of 100,000 barrels per day fell on deaf ears and the alliance may now be prepared to cut by 10 times that, even 20 if some sources are to be believed.

"Adding to the uncertainty is the prospect of a group cut backed up by additional unilateral reductions, which could significantly reduce supply and push prices back towards triple figures. With consumers only just breathing a sigh of relief after being forced to pay record prices at the pump, today's cut is not going to go down well."

On home shores, a survey released earlier showed that business activity fell in September to the lowest level since January 2021, when the country was in lockdown.

The S&P Global/CIPS composite PMI - which measures activity in both the services and manufacturing sectors - fell to 49.1 in September from 49.6 the month before, coming in below the 50.0 mark that separates contraction from expansion for the second month in a row but above the flash reading of 48.4.

Meanwhile, the PMI for the services sector declined to 50.0 from 50.9 in August as inflationary pressures dented discretionary spend, but was ahead of the flash reading of 49.2. Still, this marked the weakest service sector performance since the national lockdown in February 2021.

The survey pointed to a loss of momentum for the service sector, with an 18-month period of output expansion coming to an end amid falling volumes of incoming new work. S&P said shrinking client demand was widely put down to pressure on household budgets from escalating inflation, as well as pessimism about the economic outlook.

Tim Moore, economics director at S&P Global Market Intelligence, said: "September data highlighted an absence of growth in the UK service sector for the first time in 19 months as the energy crisis continued to hit business and consumer spending.

"Severe pressure on budgets in the wake of rising inflation, alongside deepening worries about the economic outlook, also led to a reversal in new order volumes for the first time since February 2021. "Employment trends remained positive in September, with staff numbers increasing at a strong pace as service providers adjusted to post-pandemic requirements. However, the pace of job creation has now slowed for three months running amid greater caution about future growth and sporadic reports of hiring freezes."

In equity markets, retailer Tesco fell after saying it expects current year profits to be at the lower end of guidance as "significant uncertainties" persisted during the cost-of-living crisis. The company said it expects full-year retail adjusted operating profit of between £2.4bn and £2.5bn as it said profits fell 65% to £413m in the six months to August 27.

Sainsbury’s and Ocado were also in the red.

Ascential was knocked lower by a downgrade to ‘hold’ at Deutsche Bank.

On the upside, Hill & Smith rallied after the engineering services company bought the business and assets of portable solar construction equipment manufacturer National Signal as part of a deal valued at almost $30.0m.

Market Movers

FTSE 100 (UKX) 7,006.81 -1.12%
FTSE 250 (MCX) 17,616.52 -1.15%
techMARK (TASX) 4,175.49 -0.94%

FTSE 100 - Risers

Haleon (HLN) 276.20p 0.73%
Experian (EXPN) 2,770.00p 0.62%
BAE Systems (BA.) 818.80p 0.52%
Rentokil Initial (RTO) 496.90p 0.42%
Pearson (PSON) 905.00p 0.40%
Admiral Group (ADM) 2,017.00p 0.25%
Halma (HLMA) 2,169.00p 0.23%
Relx plc (REL) 2,274.00p 0.18%
London Stock Exchange Group (LSEG) 7,730.00p 0.16%
Whitbread (WTB) 2,479.00p 0.04%

FTSE 100 - Fallers

Ocado Group (OCDO) 480.40p -5.25%
Airtel Africa (AAF) 131.80p -4.63%
Sainsbury (J) (SBRY) 172.55p -4.46%
Frasers Group (FRAS) 660.50p -4.07%
Smurfit Kappa Group (CDI) (SKG) 2,594.00p -3.93%
Mondi (MNDI) 1,363.50p -3.78%
Next (NXT) 4,844.00p -3.70%
Tesco (TSCO) 203.30p -3.19%
Anglo American (AAL) 2,825.00p -3.15%
M&G (MNG) 167.80p -3.03%

FTSE 250 - Risers

Hill & Smith Holdings (HILS) 1,018.00p 4.84%
Hilton Food Group (HFG) 585.00p 4.09%
Vietnam Enterprise Investments (DI) (VEIL) 628.00p 2.28%
Polymetal International (POLY) 203.00p 2.27%
Watches of Switzerland Group (WOSG) 771.00p 2.05%
Tullow Oil (TLW) 46.10p 1.95%
Hochschild Mining (HOC) 61.85p 1.48%
Chemring Group (CHG) 298.00p 1.36%
Wetherspoon (J.D.) (JDW) 424.80p 1.24%
Bytes Technology Group (BYIT) 438.40p 1.20%

FTSE 250 - Fallers

Synthomer (SYNT) 107.20p -7.11%
Warehouse Reit (WHR) 117.00p -5.65%
Balanced Commercial Property Trust Limited (BCPT) 75.20p -5.29%
UK Commercial Property Reit Limited (UKCM) 58.00p -4.92%
Urban Logistics Reit (SHED) 130.50p -4.74%
Currys (CURY) 61.15p -4.38%
Assura (AGR) 51.45p -4.37%
ASOS (ASC) 566.50p -4.31%
Drax Group (DRX) 548.50p -3.94%
Marks & Spencer Group (MKS) 98.48p -3.88%