London midday: Stocks in the red after borrowing, retail sales data

London stocks were still in the red by midday on Thursday following heavy losses on Wall Street, as investors digested uninspiring government borrowing and retail sales figures.

The FTSE 100 was down 0.5% 7,677.56.

Derren Nathan, head of equity research at Hargreaves Lansdown, said UK markets are unlikely to take any comfort from news that November’s budget deficit was above consensus.

"This may also limit messrs Sunak and Hunt’s wiggle room to hand out further sweeteners ahead of elections expected next year. The FTSE 100 has opened back below 7,700 after posting a 1% gain yesterday.

"This follows the biggest day of losses since October for US indices. With broad based falls across all sectors there was little shelter for traders. Both the Nasdaq Composite and S&P 500 were down 1.5%. The move was driven by relatively light trading volumes. With the US markets still at close to record highs, this optimism is showing signs of fragility."

Data released earlier by the Office for National Statistics showed that the government borrowed more than expected in November, with public sector net borrowing excluding public sector banks coming in at £14.3bn.

This was below November 2022’s £15.2bn but above consensus forecasts of £13bn. It also marked the fourth highest November borrowing since monthly records began in 1993.

Debt interest payments for November surpassed all monthly November figures on record since 1997, coming in at £7.7bn.

For the eight months to November, public sector net borrowing excluding banks was £116.4bn - up by £24.4bn on the same period a year earlier and the second highest financial year-to-November borrowing on record.

Ashley Webb, UK economist at Capital Economics, said he doubts the higher-than-expected borrowing figures will prevent the Chancellor from embarking on a pre-election fiscal splash in the Spring Budget.

Webb said the recent drop in market interest rate expectations supports CE's view that interest rates will be lower in 2025 than the Office for Budget Responsibility predicted in November.

"As a result, we expect this to give the Chancellor more wiggle room to unveil a further pre-election splash at the Sprint Budget. But this would almost certainly be followed by hefty tax rises in 2025 after the election."

Investors were also mulling the latest Distributive Trades Survey from the Confederation of British Industry, which showed the downturn in the retail sector deepened in December following a disappointing festive period.

The CBI’s retail sales balance fell to -32 from -11 in the year to November. This marked the eighth consecutive monthly decline.

The balance for expected sales for the next month also declined, to -41 in December from -6 the month before.

CBI principal economist Martin Sartorius said: "The retail sector ended 2023 on a glum note, with the ongoing downturn in sales volumes deepening during the crucial holiday trading period. Looking ahead, retailers are bracing themselves for a New Year’s chill, as sales are set to fall at an even quicker pace next month.

"Strained household finances and higher interest rates continue to take a toll on consumer spending, suggesting that retailers will have to navigate a tough demand environment in the months to come. In this context, a hike in business rates for many retailers, alongside a rise in the National Living Wage, will heap more pressure on the sector in the new year."

Corporate news was scarce as we head towards the Christmas break, but troubled music rights owner Hipgnosis Songs Fund fell as it reported wider interim losses. It also said dividends would be suspended for at least the end of the financial year to comply with loan covenants amid a row with its investment adviser over the valuation of assets.

Cyber security firm Darktrace was under the cosh. A trader said he was hearing it might be due to Mike Lynch selling stock to help fund his US fraud trial. Answers on a postcard, please.

Going the other way, Vodafone was the top gainer on the FTSE 100 following a report that Swisscom is weighing a possible offer for its Italian business next year.

Insurer Admiral was knocked lower by a downgrade to ‘hold’ from ‘buy’ at Berenberg.

Market Movers

FTSE 100 (UKX) 7,677.56 -0.49%
FTSE 250 (MCX) 19,477.00 -0.77%
techMARK (TASX) 4,273.66 -0.27%

FTSE 100 - Risers

Vodafone Group (VOD) 68.87p 2.06%
BAE Systems (BA.) 1,092.00p 0.46%
Rio Tinto (RIO) 5,809.00p 0.45%
Reckitt Benckiser Group (RKT) 5,450.00p 0.37%
Smurfit Kappa Group (CDI) (SKG) 3,192.00p 0.31%
Sage Group (SGE) 1,177.50p 0.30%
Pearson (PSON) 953.60p 0.29%
AstraZeneca (AZN) 10,510.00p 0.25%
B&M European Value Retail S.A. (DI) (BME) 576.40p 0.24%
BT Group (BT.A) 126.35p 0.24%

FTSE 100 - Fallers

Ocado Group (OCDO) 758.60p -3.85%
Burberry Group (BRBY) 1,440.00p -3.45%
British American Tobacco (BATS) 2,271.50p -2.76%
United Utilities Group (UU.) 1,076.00p -2.23%
WPP (WPP) 745.00p -1.84%
Endeavour Mining (EDV) 1,782.00p -1.76%
Scottish Mortgage Inv Trust (SMT) 781.40p -1.66%
Fresnillo (FRES) 570.20p -1.66%
Hikma Pharmaceuticals (HIK) 1,778.00p -1.60%
Glencore (GLEN) 461.70p -1.59%

FTSE 250 - Risers

Barr (A.G.) (BAG) 520.00p 1.17%
easyJet (EZJ) 513.20p 0.98%
Bank of Georgia Group (BGEO) 3,870.00p 0.91%
Harbour Energy (HBR) 246.20p 0.90%
TP Icap Group (TCAP) 192.10p 0.89%
RIT Capital Partners (RCP) 1,816.00p 0.89%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,375.00p 0.85%
Schroder Asia Pacific Fund (SDP) 494.50p 0.71%
Coats Group (COA) 79.70p 0.63%
Future (FUTR) 746.50p 0.61%

FTSE 250 - Fallers

Darktrace (DARK) 343.10p -8.77%
HGCapital Trust (HGT) 426.00p -5.02%
Syncona Limited NPV (SYNC) 116.00p -4.13%
PureTech Health (PRTC) 148.80p -3.50%
Aston Martin Lagonda Global Holdings (AML) 212.00p -3.20%
AO World (AO.) 96.80p -3.15%
Tritax Eurobox (GBP) (EBOX) 60.50p -3.04%
Britvic (BVIC) 845.00p -3.04%
Quilter (QLT) 101.30p -2.69%
Trustpilot Group (TRST) 144.20p -2.63%