London open: FTSE in the red amid growth woes; ECB in focus

London stocks fell in early trade on Thursday as worries about a slowdown in economic growth and rising inflation dented sentiment, with all eyes on the latest policy announcement from the European Central Bank.

At 0855 BST, the FTSE 100 was down 0.5% at 7,555.22.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The downbeat assessment of the prospects of the UK economy and warnings of trouble ahead for global growth are set to see a layer of pessimism descend on the London market. Warnings from the OECD that the world is paying a hefty price for Russia’s invasion of Ukraine are crystallising concerns that the months ahead are set to be very difficult to navigate for many companies and consumers.

"Worries are ratcheting up about 1970s style stagflation settling in amid the spiral higher of prices and sharply deteriorating economic prospects.

"Overall there is a ‘wait and see’ mood pervading financial markets, as investors brace for a jolt of tightening from the European Central Bank, ending the long easy-money era. This is a complex game of trying to rein in escalating inflation, while not suffocating growth and the opening gambit is set to be ceasing the mass bond buying scheme, The Asset Purchase programme later this month.

"All eyes will be on what moves are flagged next, with the start of interest rate hikes expected in July, but just how fast and how high the ECB will go in trying to keep a lid on surging prices isn’t clear. The Bank has signalled it would prefer to follow a gradual approach of a series of 0.25% rises, but with central banks in Australia and India already employing tougher tactics this week, the likelihood of a harder line emerging from the ECB is growing fast."

Adding to the downbeat mood was a report from the British Chambers of Commerce which suggested that UK economic growth will "grind to a halt" this year before falling briefly into contractionary territory. The BCC cut its 2022 growth forecast to 3.5% from 3.6% and said inflation could hit 10% in the final quarter of the year.

In equity markets, Sainsbury’s, Primark owner AB Foods, WPP, Ferrexpo and Johnson Matthey were all weaker as they traded without entitlement to the dividend.

Online trading platform CMC Markets slid as it reported a drop in full-year pre-tax profit, - although this was broadly in line with expectations - and slashed its dividend, as it said it was targeting 30% growth in net operating income over the next three years.

On the upside, GKN owner Melrose was a high riser again, having rallied on Wednesday as it announced the launch of a £500m share buyback programme.

British American Tobacco was up as it backed its full-year guidance and said its "transformation" was continuing at pace.

Mitie surged as the detention centre and building facilities operator reinstated its dividend and unveiled a £50m share buyback as it swung to a full-year profit, boosted by new contract wins.

Tate & Lyle gained as the food and beverage ingredients provider said it had seen "strong top-line growth" in the year ended 31 March, with both revenue and profits growing on an adjusted basis.

In deal news, private hospital operator Mediclinic rose after saying it had rejected a 463p a share takeover offer from a consortium comprising of shareholder Remgro and MSC Mediterranean Shipping Company.

Bus and train operator FirstGroup was a touch lower after it formally rejected a £1.2bn takeover approach from US private equity firm I Squared, saying it "significantly undervalues" the firm and a conditional cash component did not provide shareholders with enough certainty.

Market Movers

FTSE 100 (UKX) 7,555.22 -0.50%
FTSE 250 (MCX) 20,219.26 -0.45%
techMARK (TASX) 4,373.45 -0.58%

FTSE 100 - Risers

Melrose Industries (MRO) 159.50p 1.14%
Avast (AVST) 487.40p 0.91%
BP (BP.) 455.00p 0.80%
British American Tobacco (BATS) 3,592.00p 0.71%
Shell (SHEL) 2,456.50p 0.68%
SSE (SSE) 1,784.00p 0.54%
Harbour Energy (HBR) 388.20p 0.34%
Diageo (DGE) 3,611.50p 0.32%
Entain (ENT) 1,457.00p 0.24%
NATWEST GROUP PLC ORD 100P (NWG) 230.40p 0.22%

FTSE 100 - Fallers

Sainsbury (J) (SBRY) 210.10p -5.53%
Kingfisher (KGF) 244.00p -4.65%
Royal Mail (RMG) 282.10p -3.19%
Associated British Foods (ABF) 1,658.00p -2.93%
Hikma Pharmaceuticals (HIK) 1,605.00p -2.52%
B&M European Value Retail S.A. (DI) (BME) 365.10p -2.48%
WPP (WPP) 891.20p -2.37%
Persimmon (PSN) 2,170.00p -2.16%
Aveva Group (AVV) 2,415.00p -2.15%
JD Sports Fashion (JD.) 119.65p -2.13%

FTSE 250 - Risers

Mitie Group (MTO) 68.30p 10.88%
Tate & Lyle (TATE) 774.50p 3.96%
Mediclinic International (MDC) 440.00p 3.53%
Capricorn Energy (CNE) 236.60p 2.96%
Spire Healthcare Group (SPI) 229.00p 2.69%
Britvic (BVIC) 815.50p 2.00%
Syncona Limited NPV (SYNC) 204.00p 2.00%
Abrdn Private Equity Opportunities Trust (APEO) 468.00p 1.52%
Energean (ENOG) 1,345.50p 1.32%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 322.00p 1.26%

FTSE 250 - Fallers

CMC Markets (CMCX) 258.00p -14.71%
Ferrexpo (FXPO) 179.40p -4.57%
Wizz Air Holdings (WIZZ) 2,407.00p -3.68%
Johnson Matthey (JMAT) 2,049.00p -3.62%
Edinburgh Worldwide Inv Trust (EWI) 178.00p -3.58%
Darktrace (DARK) 363.40p -3.09%
Workspace Group (WKP) 675.00p -2.88%
Marshalls (MSLH) 527.00p -2.59%
Plus500 Ltd (DI) (PLUS) 1,533.00p -2.54%
Marks & Spencer Group (MKS) 144.70p -2.39%