London midday: Stocks turn negative ahead of US data

London stocks had moved into the red by midday on Tuesday as investors mulled the latest UK retail sales figures and looked ahead to key US data releases.

The FTSE 100 was down 0.6% at 8,317.87.

Joshua Mahony, chief market analyst at Scope Markets, said: "The manufacturing sector remains in focus today, with the US ISM manufacturing PMI released in the afternoon. Coming off the back of a concerning slump that saw the July metric fall to an eight-month low, traders will be on the lookout for further cause for concern as we weight up the trajectory of the US economy. Crucially, the divergence between higher prices and lower output for the manufacturing sector provides a worst-case scenario that the Federal Reserve will want to see come to an end sooner rather than later.

"Elsewhere, this week looks to gradually build towards Friday’s jobs report, with traders on the lookout for additional signs of a potential impending recession. Coming off the back of a surprise jump in unemployment that saw the key metric rise to the highest rate since October 2021, the trajectory of unemployment will be crucial in determining the market expectations for the Fed going forward."

The ISM manufacturing PMI for August is due at 1500 BST. Before that, the S&P Global manufacturing PMI, also for August, is scheduled for release at 1445 BST.

On home shores, data released earlier showed that retail sales were higher than last year in August despite already strong comparatives in 2023, though growth was relatively subdued amid a "challenging" environment that's likely to last until the end of the year.

The British Retail Consortium-KPMG Retail Sales Monitor for August showed a 1% year-on-year increase in UK retail sales, against an increase of 4.1% in August 2023.

This was above the three-month average growth rate of 0.4%, but slightly below the 12-month average of +1.2%.

Food sales were 2.9% higher in the three months to August, making up for the 1.7% decline in non-food sales.

"Sales growth picked up in August, particularly for food as people came together to host barbecue and picnic gatherings for family and friends, and for summer clothing, health and beauty products as people prepared for trips away and summer social events," said BRC chief executive Helen Dickinson.

"While computing did well as university students made the most of summer discounting and readied themselves for the new academic year, other back to school related sales were weaker than normal as some families opted for second hand purchases."

In equity markets, Rolls-Royce was the standout gainer, having slumped on Monday when it was hit by news that Cathay Pacific had temporarily grounded its fleet of A350 aircraft for inspections after discovering problems with its RR engines.

Cathay Pacific said on Tuesday that three of the 48 Rolls-Royce-powered planes it had inspected had been successfully repaired and all of the jets were set resume operation by Saturday.

Russ Mould, investment director at AJ Bell, said the rebound in the share price "isn’t guaranteed to last, particularly as there is still a lack of detailed information on the incident and how many other engines might be affected".

He added: "Another scandal could scupper Rolls-Royce’s recovery efforts. A lot of people will remember the company’s previous crisis involving its Trent 1000 engines, which damaged the British engineer’s reputation and led to significant extra costs.

"Since then, it has worked tirelessly to get back on track while also trying to make the business run more efficiently and operate in a leaner way.

"It has enjoyed considerable share price gains in the past few years and investors will be keeping their fingers crossed that the Cathay Pacific incident is an isolated one. Given this is still a fluid situation, shareholders need to brace themselves for more share price volatility."

Ashtead also rallied after it posted a drop in first-quarter profit that was in line with market expectations.

Russ Mould said: "Ashtead’s first-quarter results are not particularly flashy, but the absence of any further profit warnings is giving the shares a lift, as profit momentum seems to be bottoming out."

Hikma was boosted by an upgrade to ‘buy’ from ‘hold’ at Berenberg.

Luxury timepiece seller Watches of Switzerland surged as it said it was on track to meet annual guidance after trading for the first 18 weeks of the financial year had been in line with expectations.

The company said demand for key luxury brands, particularly products on registration of interest lists, remained strong in both the UK and US markets, outstripping supply.

Market Movers

FTSE 100 (UKX) 8,317.87 -0.55%
FTSE 250 (MCX) 20,922.91 -0.27%
techMARK (TASX) 4,919.32 -0.08%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 478.10p 2.97%
Ashtead Group (AHT) 5,490.00p 2.46%
Tesco (TSCO) 361.50p 1.52%
Hikma Pharmaceuticals (HIK) 1,998.00p 1.22%
B&M European Value Retail S.A. (DI) (BME) 441.50p 0.91%
Vodafone Group (VOD) 76.26p 0.85%
Intertek Group (ITRK) 4,944.00p 0.77%
Marks & Spencer Group (MKS) 342.50p 0.76%
easyJet (EZJ) 478.40p 0.72%
Sainsbury (J) (SBRY) 297.80p 0.61%

FTSE 100 - Fallers

Rightmove (RMV) 675.20p -4.63%
Glencore (GLEN) 387.30p -3.10%
Anglo American (AAL) 2,148.50p -3.00%
Fresnillo (FRES) 526.00p -2.95%
NATWEST GROUP (NWG) 335.10p -2.27%
Melrose Industries (MRO) 475.30p -2.16%
Antofagasta (ANTO) 1,804.00p -2.09%
BP (BP.) 421.90p -1.94%
Rio Tinto (RIO) 4,612.50p -1.89%
Shell (SHEL) 2,638.00p -1.73%

FTSE 250 - Risers

Watches of Switzerland Group (WOSG) 391.40p 3.99%
Ocado Group (OCDO) 350.90p 2.90%
IP Group (IPO) 43.15p 2.37%
Kainos Group (KNOS) 969.00p 2.22%
Apax Global Alpha Limited (APAX) 145.40p 1.82%
Genus (GNS) 1,828.00p 1.67%
Dr. Martens (DOCS) 71.20p 1.64%
WH Smith (SMWH) 1,304.00p 1.64%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 476.50p 1.49%
TI Fluid Systems (TIFS) 130.40p 1.40%

FTSE 250 - Fallers

AO World (AO.) 110.00p -3.51%
TBC Bank Group (TBCG) 2,990.00p -2.92%
Hochschild Mining (HOC) 167.00p -2.79%
Auction Technology Group (ATG) 387.00p -2.40%
Diversified Energy Company (DEC) 871.50p -2.08%
Renewi (RWI) 645.00p -1.98%
Wood Group (John) (WG.) 132.10p -1.93%
Johnson Matthey (JMAT) 1,593.00p -1.91%
Abrdn (ABDN) 146.55p -1.91%
Elementis (ELM) 158.80p -1.85%