London open: Stocks edge down after borrowing figures

London stocks edged lower in early trade on Tuesday as investors mulled the latest UK borrowing figures and continued to eye US debt ceiling talks.

At 0835 BST, the FTSE 100 was down 0.2% at 7,754.99.

US President Joe Biden and Republican leader Kevin McCarthy failed to reach an agreement on the debt ceiling on Monday, but insisted that talks had been "productive". McCarthy said a deal can be done, while Biden said a default was "off the table".

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Debt ceiling talks are inching forward, but it’s slow progress, and with uncertainty hanging in the air, gains on equity markets are being held back. The FTSE 100 has opened lower, following on from a weaker session in Asia and lacklustre trading on Wall Street.

"If no agreement is reached, the US could default on interest it owes on its debts, sending borrowing costs soaring and sending shockwaves through the global economy. The forecast incoming mild recession would turn into a storm and the US financial credibility would be badly shaken. That’s why President Biden and Kevin McCarthy, the Republican House Speaker, are saying they are confident there will be no default, but it’s clear Republicans want to squeeze every drop of commitment to curtail spending out of the administration.

"With talks going to the wire, caution is set to stay front and centre on financial markets."

On home shores, meanwhile, figures from the Office for National Statistics showed that the government borrowed more than expected last month as energy support schemes, benefit payments and higher debt interest payments pushed up spending.

Net borrowing for April came in at £25.6bn, well above expectations of £19.1bn and up from April’s £13.7bn.

It was also above the Office for Budget Responsibility’s forecast of £22.4bn and marked the second-highest April borrowing figure since monthly records began in 1993.

The ONS said growth in receipts was exceeded by the additional costs of the energy support schemes, increases in benefit payments and higher debt interest payable.

Central government debt interest payable was £9.8bn in April, up by £3.1bn on the same month last year and the highest April figure since monthly records began in 1997.

The figures showed that the government spent £3.9bn on subsidies, which is £1.8bn higher than in April 2022, mainly due to the Energy Price Guarantee and the energy bills discount scheme.

The ONS also said on Tuesday that it had revised down its initial estimate of borrowing for the year to March 2023 by £2.1bn to £137.1bn.

Still to come on the data front, the S&P Global/CIPS services and manufacturing PMIs for May are due at 0930 BST.

In equity markets, RS Group - formerly known as Electrocomponents - was under the cosh after full-year results, as it said trading over the first seven weeks of 2023/24 reflected "a slowing" in industrial growth, and pointed to continued weakness and aggressive competition in electronics.

Pennon also lost ground after Ofwat said it has launched an enforcement investigation into South West Water’s leakage performance.

On the upside, SSP surged to the top of the FTSE 250 after the Upper Crust owner said FY 2023 sales and core profit were set to be at the upper end of its expectations, as it hailed a strong first half performance, particularly in North America.

The company had guided to sales of £2.9bn to £3bn and earnings before interest, tax, depreciation and amortisation of £250m to £280m.

BT Group nudged higher after Altice upped its stake in the telecommunications firm to 24.5% but insisted it does not plan to make a takeover offer. Altice, which is owned by billionaire Patrick Drahi, was already BT’s biggest shareholder, with an 18% stake.

Elsewhere, meat producer Cranswick gained as it reported a rise in full-year profit and revenue.

Market Movers

FTSE 100 (UKX) 7,754.99 -0.21%
FTSE 250 (MCX) 19,274.06 0.00%
techMARK (TASX) 4,716.74 -0.01%

FTSE 100 - Risers

Mondi (MNDI) 1,302.50p 0.97%
British American Tobacco (BATS) 2,700.50p 0.82%
Kingfisher (KGF) 243.50p 0.79%
Pearson (PSON) 833.80p 0.77%
Smurfit Kappa Group (CDI) (SKG) 3,012.00p 0.60%
Land Securities Group (LAND) 634.40p 0.48%
BT Group (BT.A) 148.55p 0.47%
F&C Investment Trust (FCIT) 900.00p 0.45%
Convatec Group (CTEC) 223.00p 0.36%
Hargreaves Lansdown (HL.) 819.20p 0.29%

FTSE 100 - Fallers

RS Group (RS1) 817.20p -4.17%
JD Sports Fashion (JD.) 158.20p -1.37%
Severn Trent (SVT) 2,781.00p -1.10%
Burberry Group (BRBY) 2,306.00p -1.07%
Flutter Entertainment (CDI) (FLTR) 16,555.00p -1.02%
United Utilities Group (UU.) 1,030.00p -1.01%
International Consolidated Airlines Group SA (CDI) (IAG) 157.25p -0.91%
Halma (HLMA) 2,433.00p -0.90%
Antofagasta (ANTO) 1,415.00p -0.81%
Rightmove (RMV) 555.20p -0.79%

FTSE 250 - Risers

SSP Group (SSPG) 276.60p 4.69%
Essentra (ESNT) 195.40p 3.06%
Watches of Switzerland Group (WOSG) 709.00p 2.83%
Senior (SNR) 182.00p 2.82%
Bakkavor Group (BAKK) 95.00p 2.81%
Premier Foods (PFD) 132.20p 2.64%
Wood Group (John) (WG.) 142.20p 2.45%
PureTech Health (PRTC) 216.00p 2.37%
Vesuvius (VSVS) 427.40p 2.15%
Cranswick (CWK) 3,202.00p 1.97%

FTSE 250 - Fallers

Pennon Group (PNN) 792.50p -3.59%
Ninety One (N91) 160.00p -3.32%
Capricorn Energy (CNE) 187.00p -2.81%
Volution Group (FAN) 436.00p -2.29%
Auction Technology Group (ATG) 730.00p -2.28%
Allianz Technology Trust (ATT) 242.50p -2.22%
Future (FUTR) 852.50p -2.18%
Tullow Oil (TLW) 24.38p -2.09%
Ithaca Energy (ITH) 155.90p -1.95%
ICG Enterprise Trust (ICGT) 1,132.00p -1.57%