London midday: Stocks sink as survey shows rise in consumer borrowing

London stocks sank further into negative territory by lunchtime on Monday, after data showed a rise in consumer borrowing amid a surging cost of living, and as ongoing Covid-19 lockdowns in China dented sentiment further.

At 1203 BST, the FTSE 100 was down 1.97% at 7,373.25, and the FTSE 250 was 1.84% lower at 20,496.80.

“The markets have fallen out of bed in a big way on Monday after a big sell-off in Asia amid fears of a Covid lockdown in Beijing,” said AJ Bell investment director Russ Mould.

“The prospect of further restrictions in China could lead to a poisonous mix of further inflationary pressure, as supply chains in the so-called ‘factory of the world’ get disrupted, and weaker economic growth.

“The result could be stagflation - a slowing economy accompanied by surging prices - a brew few investors would be able to stomach.”

On the economic front, almost 90% of British adults reported an increase in the cost of living last month, the Office for National Statistics said.

According to the ONS’s latest Opinions and Lifestyle Survey, 87% of respondents said their cost of living had increased between 16 to 27 March over the previous month, up from the 62% who reported a rise in November 2021.

Nearly a quarter said they had found it “very difficult or difficult” to pay their usual household bills compared to a year ago, while of those who paid energy bills, 43% reported that they had found them hard to pay.

As a result, 17% of respondents reported borrowing more money than they did a year previously, while more than half - 54% - said they were spending less on non-essential goods and services.

Elsewhere, average UK house asking prices hit a new record in the first three months of 2022, according to website Rightmove.

The average asking price surged by £19,082 to £360,101, with 53% of properties selling at or over their final advertised asking price - the highest percentage Rightmove said it had recorded.

Timescales to shift properties also halved over the past three years - from an average of 67 days three years ago to 33.

"With three new monthly price records in a row, 2022 has started with price rise momentum even greater than during the stamp duty holiday-fuelled market of last year," said Tim Bannister, Rightmove's director of property data.

"While growing affordability constraints mean that this momentum is not sustainable for the longer term, the high demand from a large number of buyers chasing too few properties for sale has led to a spring price frenzy, a hat-trick of record price months, and the largest price increase for a three-month period Rightmove has ever recorded.”

On the continent, meanwhile, a closely-watched survey showed German business sentiment unexpectedly strengthening in April, despite the ongoing war in Ukraine.

Ifo’s Business Climate Index rose to 91.8 points in April, from 90.8 in March.

The current situation index rose only marginally, to 97.2 from 97.1, but the expectations index - which tumbled last month to 84.9 from 98.7 in February - rose to 86.7.

“After the initial shock of the Russian attack, the German economy has shown its resilience,” said Clemens Fuest, president of the Ifo Institute.

Sentiment was seriously negative from the start of the day, after reports that the European Union was preparing smart sanctions against imports of Russian oil, although in remarks to Die Welt the bloc's foreign policy said there was not yet enough support for a complete embargo nor for punitive tariffs.

Elsewhere on the geopolitical front, UN chief Antonio Guterres, was scheduled to visit Ankara on Monday and Moscow on Tuesday in a bid to try and re-energise peace talks as Russia’s unprovoked invasion of Ukraine entered its ninth week.

Some observers were hoping that an agreement on evacuating the city of Mariupol or for a ceasefire during Orthodox Easter might generate the needed momentum for talks to succeed.

In equities, Anglo American was more than 7% weaker after the Chilean environmental regulator recommended denying an extension to its Los Bronces copper project.

Chile's Environmental Assessment Service (SEA) issued the recommendation last week, with a final decision on $3.3bn investment expected soon.

"The SEA’s recommendation is despite the strong support for the project offered to date by 23 of the 25 technical services bodies and government ministries that form part of the assessment process," Anglo American said in a statement.

Elsewhere, real estate investor British Land was down after selling a 75% stake in the bulk of its Paddington Central assets to GIC for £694.0m, to establish a new joint venture between the pair.

British Land said establishment of the joint venture, which was unconditional and will be within three months, would see it deliver against one of its key priorities of proactively recycling capital out of mature assets where it had created "considerable value".

Urban Logistics was falling after reporting the deployment of a further £45m of capital at a blended net initial yield of 6.7% since 28 March.

The FTSE 250 real estate investment trust said its total deployment since its December fundraise now stood at £184m, at a blended net initial yield of 5.4%.

It had agreed five new lettings, three rent reviews and two lease regears in the period, covering 630,000 square feet of space, while rent reviews and regears were settled at a blended 13% increase over passing rent, the board said.

LondonMetric Property was still below the line after buying six London urban logistics warehouses in separate transactions for £26.7m, reflecting an anticipated blended initial yield of 4.3% and a reversionary yield of more than 4.5%.

The assets were expected to generate a total rent of £1.2m a year, while in a separate deal, the company sold a multi-let industrial estate for £8.5m.

On the upside, Polymetal International was more than 3% firmer after it reported a rise in first-quarter revenue, driven by higher prices and despite a fall in production.

Revenue for the three months to March 31 increased 4% year on year to $616m, while production of gold equivalent was down 6% to 372,000 troy ounces.

Polymetal said it still expected to produce 1.7 million ounces in 2022.

Market Movers

FTSE 100 (UKX) 7,359.97 -2.15%
FTSE 250 (MCX) 20,486.75 -1.89%
techMARK (TASX) 4,319.75 -1.52%

FTSE 100 - Risers

Reckitt Benckiser Group (RKT) 6,224.00p 1.40%
Unilever (ULVR) 3,585.00p 1.24%
BT Group (BT.A) 188.50p 1.13%
International Consolidated Airlines Group SA (CDI) (IAG) 150.84p 1.02%
Smith (DS) (SMDS) 328.60p 0.58%
National Grid (NG.) 1,177.50p 0.43%
Meggitt (MGGT) 773.60p 0.16%
Diageo (DGE) 3,896.50p -0.01%
Hikma Pharmaceuticals (HIK) 2,011.00p -0.05%
Pearson (PSON) 782.00p -0.10%

FTSE 100 - Fallers

Anglo American (AAL) 3,214.00p -7.12%
Aveva Group (AVV) 2,358.00p -6.39%
Glencore (GLEN) 447.00p -6.13%
Rio Tinto (RIO) 5,361.00p -5.35%
Ashtead Group (AHT) 4,415.00p -4.83%
BP (BP.) 374.45p -4.76%
Endeavour Mining (EDV) 1,929.00p -4.60%
Burberry Group (BRBY) 1,559.50p -4.59%
Intermediate Capital Group (ICP) 1,566.00p -4.04%
Ferguson (FERG) 10,125.00p -3.94%

FTSE 250 - Risers

Polymetal International (POLY) 280.00p 3.70%
Drax Group (DRX) 791.00p 1.22%
easyJet (EZJ) 575.20p 1.20%
GCP Infrastructure Investments Ltd (GCP) 118.80p 0.85%
Great Portland Estates (GPE) 705.00p 0.71%
Wizz Air Holdings (WIZZ) 3,140.00p 0.61%
Playtech (PTEC) 549.00p 0.37%
Hipgnosis Songs Fund Limited NPV (SONG) 117.20p 0.17%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 314.00p 0.16%
Mediclinic International (MDC) 377.20p 0.11%

FTSE 250 - Fallers

BlackRock World Mining Trust (BRWM) 660.00p -8.46%
IWG (IWG) 253.50p -6.15%
Lancashire Holdings Limited (LRE) 366.20p -5.81%
Ferrexpo (FXPO) 164.40p -5.73%
Hochschild Mining (HOC) 119.90p -5.66%
Watches of Switzerland Group (WOSG) 1,054.00p -5.64%
Future (FUTR) 2,242.00p -5.64%
Tyman (TYMN) 286.50p -5.45%
Liontrust Asset Management (LIO) 1,156.00p -5.25%
Dr. Martens (DOCS) 225.00p -4.98%