London close: FTSE dips below 7,000 amid inflation fears
London stocks closed in negative territory on Wednesday, as inflation concerns grew amid surging oil and gas prices, and as investors mulled a disappointing reading on the UK construction sector.
The FTSE 100 ended the session down 1.15% at 6,995.87, and the FTSE 250 was 1.51% weaker at 22.386.62.
Sterling was also in the red, last falling 0.47% against the dollar to trade at $1.3565, and losing 0.03% on the euro to €1.1747.
“The end of 2021 appears daunting for a whole host of reasons, with supply-chain difficulties, labour shortages, and soaring input prices all serving to dampen sentiment for businesses,” said IG senior market analyst Joshua Mahony.
“There is little worry that consumer and corporate demand is lacking, yet there are major questions over whether firms will be capable of fulfilling that need.
“Instead, we are faced with a potential end to the year where sky-high input prices drive down margins, and the already dwindling inventories soon result in empty shelves.”
Mahony said businesses in China had been warned to “grab as much energy as possible”, while Boris Johnson noted it might make sense to buy early this Christmas.
“Ultimately, businesses and consumers alike could be faced with a festive season characterised by scarcity rather than the usual excess.”
Across the pond, job growth in the US sped ahead of forecasts last month, according to the results of a closely-followed survey.
According to consultancy ADP, private sector payrolls increased by 568,000 in September - ahead of the 430,000 forecast by economists.
On home shores, meanwhile, a survey out earlier showed the construction sector’s recovery stalled last month as higher prices, staff shortages and supply chain disruptions hit home.
The IHS Markit/CIPS construction PMI total activity index came in a 52.6 in September, down on August’s 55.2 and a further decline on June’s 24-year high of 66.3.
It was also below consensus, with most analysts expecting 54.0, and the lowest reading since January.
All three categories reported a loss of momentum, with the biggest slowdown seen in civil engineering, which fell to 51.0 from 54.8 a month previously.
Housebuilding was 52.8, down on August’s 55.0 and the weakest expansion since June 2020, while commercial was the best performing segment, at 53.6, though that was still down August’s 56.0.
Respondents attributed the slowdown to supply chain issues, a "severe" lack of materials, ongoing staff shortages and softer demand following the summer peak.
“The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards,” said Tim Moore, director at IHS Markit.
“As a result, the latest survey data pointed to the worst month for order books since January’s lockdown.”
In equity markets, tobacco giant Imperial Brands slumped 3.77% despite saying it was on track to meet full-year expectations as the business continued to perform well.
IP Group slid 5.15% after it said chief executive Alan Aubrey and chief investment officer Mike Townend were retiring and stepping down from the board with immediate, following the successful flotation of its largest holding, Oxford Nanopore Technologies.
Homeserve was knocked 3.21% lower by a downgrade to ‘underperform’ from ‘outperform’ at Exane.
Online greeting cards retailer Moonpig was under the cosh by 4.36% after Davy initiated coverage of the shares at ‘neutral’, and said the valuation feels full despite a "rather anaemic" equity performance since it went public in February.
On the upside, supermarket chain Tesco rallied 5.95% as it lifted full-year earnings guidance after strong first-half sales helped interim profits to more than double against a backdrop of labour shortages and cost pressures.
The company also said it was starting an ongoing share buyback with the first tranche of £500m to be bought within a year.
Recruiter PageGroup rose 7.84% after it lifted its guidance for full-year operating profit to around £155m from between £125m and £135m, as it reported a jump in third-quarter gross profit.
HSBC was lifted 3.38% by an upgrade to ‘buy’ at UBS.
Market Movers
FTSE 100 (UKX) 6,995.87 -1.15%
FTSE 250 (MCX) 22,386.62 -1.51%
techMARK (TASX) 4,506.18 -1.39%
FTSE 100 - Risers
Tesco (TSCO) 268.05p 5.95%
HSBC Holdings (HSBA) 406.30p 3.38%
Pearson (PSON) 744.40p 3.05%
Fresnillo (FRES) 797.40p 2.31%
Standard Chartered (STAN) 450.50p 1.97%
Pershing Square Holdings Ltd NPV (PSH) 2,685.00p 1.51%
Polymetal International (POLY) 1,257.00p 1.33%
Intermediate Capital Group (ICP) 2,055.00p 0.93%
Hargreaves Lansdown (HL.) 1,415.00p 0.46%
Prudential (PRU) 1,484.00p 0.41%
FTSE 100 - Fallers
Antofagasta (ANTO) 1,282.00p -5.46%
Next (NXT) 7,654.00p -4.82%
Whitbread (WTB) 3,212.00p -4.58%
Melrose Industries (MRO) 161.40p -4.53%
JD Sports Fashion (JD.) 1,024.50p -4.16%
Imperial Brands (IMB) 1,495.00p -3.77%
Informa (INF) 562.20p -3.53%
Taylor Wimpey (TW.) 148.00p -3.33%
International Consolidated Airlines Group SA (CDI) (IAG) 180.20p -3.32%
BT Group (BT.A) 146.50p -3.20%
FTSE 250 - Risers
Pagegroup (PAGE) 663.50p 7.84%
Endeavour Mining (EDV) 1,700.00p 4.29%
Hays (HAS) 160.90p 3.41%
Baltic Classifieds Group (BCG) 188.50p 1.62%
Centamin (DI) (CEY) 93.58p 1.61%
Spire Healthcare Group (SPI) 217.00p 1.40%
Hochschild Mining (HOC) 132.10p 1.38%
Bridgepoint Group (Reg S) (BPT) 505.00p 1.30%
Biffa (BIFF) 355.00p 1.28%
AO World (AO.) 160.40p 1.20%
FTSE 250 - Fallers
Trustpilot Group (TRST) 350.80p -8.02%
Draper Esprit (GROW) 930.00p -7.10%
Elementis (ELM) 130.30p -6.33%
Greggs (GRG) 3,023.00p -6.05%
Aston Martin Lagonda Global Holdings (AML) 1,650.50p -5.71%
Wetherspoon (J.D.) (JDW) 975.50p -5.47%
IP Group (IPO) 129.00p -5.15%
Network International Holdings (NETW) 325.00p -5.14%
Restaurant Group (RTN) 101.00p -5.12%
Cineworld Group (CINE) 71.86p -5.10%