London open: Stocks in the red as BoE expands bond-buying scheme

London stocks fell in early trade on Tuesday after the Bank of England intervened in bond markets once more, and as investors mulled the latest UK jobs data.

At 0840 BST, the FTSE 100 was down 0.8% at 6,903.54, while the pound was 0.1% lower against the dollar at 1.1047.

Richard Hunter, head of markets at Interactive Investor, said: "The growing list of concerns with which investors are grappling has led to further market weakness in the absence of any respite.

"The latest semiconductor restrictions are a reminder of the fractious relationship between the US and China, while the fresh escalation of hostilities in the Russia and Ukraine war add to an already brittle sentiment. Alongside the existing recessionary fears following on from the Federal Reserve’s stubbornly aggressive policy in raising rates to tackle inflation, for the moment there seems to be little light at the end of the tunnel."

On home shores, the Bank of England announced earlier that it has widened its emergency bond-buying programme to include index-linked bonds, which are linked to inflation. The Bank said the beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts.

"Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability," it said.

The announcement followed another selloff in UK debt markets, particularly in the index-linked market, and came just a day after the BoE said it would double the size of its daily purchases to £10bn.

Neil Wilson, chief market analyst at Markets.com, said: "It all seems rather messy and panicky - as expected the market was always going to retest the Bank’s resolve and put the Budget to the sword. To expand your emergency intervention in the market once is unfortunate, to do so twice looks like carelessness."

Investors were also mulling the latest figures from the Office for National Statistics, which showed the unemployment rate fell in the three months to August to its lowest level since February 1974 as more Britons dropped out of the workforce due to long-term illness.

The unemployment rate declined to 3.5% from 3.6% in the previous three months, versus expectations for it to remain unchanged. The ONS said the number of those "economically inactive" because they are long-term sick increased to a record high.

Total pay, including bonuses, rose 6% on the year, up from 5.5% in the three months to July. Regular pay, excluding bonuses, was grew 5.4%, up from 5.2%. In real terms, however, adjusted for inflation, total pay fell 2.4% and regular pay was down 2.9%.

The data showed that the number of workers on payrolls rose by 69,000 between August and September to a record 29.7m.

David Freeman, head of labour market and household statistics at the ONS, said: "The unemployment rate continues to fall and is now at its lowest for almost 50 years.

"However, the number of people neither working nor looking for work continues to rise, with those who say this is because they’re long-term sick reaching a record level.

"While the number of job vacancies remains high after its long period of rapid growth, it has now dropped back a little, with a number of employers telling us they’ve reduced recruitment due to a variety of economic pressures.

"However, because unemployment is also down, there continues to be more vacancies than unemployed people."

Elsewhere, the latest BRC-KPMG Retail Sales Monitor revealed that sales volumes continued to fall in September as weakening consumer confidence weighed heavily on spending.

In equity markets, Aviva, Legal & General and Prudential all fell after the BoE warned over dysfunction in the government debt market.

PureTech Health was on the back foot after saying that it and US-based Nektar Therapeutics terminated merger talks only four days after they announced a potential tie-up.

Irish convenience food group Greencore fell after it said full-year adjusted operating profit and earnings per share were set to be at the lower end of the expected range, partly due to the impact of rail strikes.

Ferrexpo tumbled as the iron ore pellet maker said it had suspended operations in Ukraine after Monday’s Russian missile strikes on the country damaged electrical power infrastructure.

British Gas owner Centrica was boosted by an upgrade to ‘buy’ at Citi, while Drax was higher after an upgrade to ‘neutral’ by the same outfit. Both stocks fell sharply on Monday following reports UK ministers are pressing ahead with a renewable energy windfall tax.

B&Q owner Kingfisher was weaker after a downgrade to ‘sell’ at Numis.

Market Movers

FTSE 100 (UKX) 6,903.54 -0.80%
FTSE 250 (MCX) 17,004.54 -0.71%
techMARK (TASX) 4,102.77 -0.54%

FTSE 100 - Risers

Centrica (CNA) 70.44p 2.03%
Rentokil Initial (RTO) 470.70p 1.20%
Coca-Cola HBC AG (CDI) (CCH) 1,978.00p 0.97%
Ocado Group (OCDO) 442.00p 0.96%
Next (NXT) 4,565.00p 0.79%
Sainsbury (J) (SBRY) 174.25p 0.72%
Haleon (HLN) 273.05p 0.70%
Smith & Nephew (SN.) 1,019.50p 0.44%
Tesco (TSCO) 207.00p 0.44%
Smith (DS) (SMDS) 272.10p 0.37%

FTSE 100 - Fallers

Rio Tinto (RIO) 4,955.00p -3.22%
Aviva (AV.) 389.30p -2.77%
Legal & General Group (LGEN) 217.90p -2.68%
Glencore (GLEN) 480.85p -2.54%
Anglo American (AAL) 2,691.00p -2.23%
Antofagasta (ANTO) 1,098.00p -2.23%
Intermediate Capital Group (ICP) 1,033.50p -1.99%
Kingfisher (KGF) 208.00p -1.98%
Prudential (PRU) 904.00p -1.95%
Croda International (CRDA) 6,596.00p -1.82%

FTSE 250 - Risers

Drax Group (DRX) 544.50p 2.25%
NextEnergy Solar Fund Limited Red (NESF) 102.20p 1.19%
Smithson Investment Trust (SSON) 1,193.00p 1.10%
Twentyfour Income Fund Limited Ord Red (TFIF) 95.00p 1.06%
Plus500 Ltd (DI) (PLUS) 1,783.00p 0.91%
Syncona Limited NPV (SYNC) 164.00p 0.86%
City of London Inv Trust (CTY) 383.50p 0.66%
International Distributions Services (IDS) 204.70p 0.49%
Templeton Emerging Markets Inv Trust (TEM) 143.60p 0.42%
Britvic (BVIC) 732.50p 0.41%

FTSE 250 - Fallers

Ferrexpo (FXPO) 116.70p -8.11%
PureTech Health (PRTC) 220.00p -3.72%
Johnson Matthey (JMAT) 1,802.00p -3.33%
Marshalls (MSLH) 242.20p -2.96%
Molten Ventures (GROW) 264.20p -2.80%
Diversified Energy Company (DEC) 127.50p -2.75%
Aston Martin Lagonda Global Holdings (AML) 87.80p -2.57%
Merchants Trust (MRCH) 493.00p -2.38%
Wood Group (John) (WG.) 122.15p -2.32%
888 Holdings (DI) (888) 92.80p -2.32%