London close: FTSE gains despite political chaos
London stocks ended firmly in the black on Wednesday following a heavy selloff in the previous session, as investors largely shrugged off political turmoil.
The FTSE 100 closed up 1.2% at 7,107.77, having lost 2.9% on Tuesday amid renewed concerns about inflation and a global slowdown.
Prime Minister Boris Johnson’s future was hanging in the balance following a string of resignations by Conservative MPs, which was kicked off on Tuesday evening by Chancellor Rishi Sunak and Health Secretary Sajid Javid.
Having tumbled to a two-year low against the dollar in the aftermath of the resignations, sterling was down 0.4% at 1.1898 at the close of stock markets.
IG market analyst Chris Beauchamp said: "The British prime minister might be heading rapidly towards his resignation, despite his protestations to the contrary, but the pound seems relatively steady.
"Losses have been pared back, and while the currency has dropped sharply this looks more like a function of dollar strength, given the similar weakness for the euro against the greenback. Boris’ apparently-imminent defenestration might not have much impact, since it is unlikely to provoke a general election. Even if it did, without Jeremy Corbyn to scare investors, markets seem much more sanguine about a change of government than was the case in 2019."
On the macroeconomic front, a survey showed growth in the UK construction sector slowed in June to its weakest rate since September last year, with housing activity down for the first time in more than two years amid worries about the economic outlook.
The S&P Global/CIPS construction purchasing managers’ index fell to 52.6 from 56.4 in May, coming in below analysts’ expectations for a reading of 55.0. A level above 50.0 signals expansion, while a reading below indicates contraction.
Housebuilding was the weakest area of construction activity for the fourth month in a row, with the index for the sub-sector printing below 50.0 at 49.3. Meanwhile, civil engineering was the most resilient sub-sector.
New orders increased to the smallest extent since October 2021 and the survey found that concerns about the near-term economic outlook led to a sharp decline in business expectations for the year ahead.
Tim Moore, Economics Director at S&P Global Market Intelligence, said: "The gloomy UK business outlook and worsening consumer demand due to the cost of living crisis combined to put the brakes on construction growth in June. Commercial construction saw a considerable loss of momentum as clients exercised greater caution on new spending, while long-term infrastructure projects ensured a relatively resilient trend for civil engineering activity.
"House building has expanded more quickly than the rest of the construction sector over the course of the pandemic, but now finds itself as the worst-performing broad category so far in 2022. Moreover, the latest survey indicated an outright decline in residential work for the first time in just over two years.
"Construction companies appear braced for a difficult second half of the year as new order growth and business activity expectations fell again in June, reflecting inflation concerns, higher interest rates and less favourable domestic economic conditions. Measured overall, the degree of optimism across the construction sector is now the lowest seen since July 2020."
In equity markets, Abrdn rallied after it announced the launch of a £300m share buyback programme.
Intermediate Capital also rose after The Times reported that the fund manager was in exclusive talks to buy Wembley Arena.
Online rail ticketing platform Trainline surged as it lifted annual guidance after a bigger-than-expected surge in demand for travel, particularly from US visitors.
Industrial thread maker Coats pushed higher after announcing the acquisition of Texon International Group, a footwear solutions provider, for an enterprise value of $237m.
Discoverie also advanced after saying it had bought CDT, a designer and manufacturer of customised plastic enclosures for circuit boards, membrane keypads and associated electronics components, for £5m.
Market Movers
FTSE 100 (UKX) 7,107.77 1.17%
FTSE 250 (MCX) 18,594.48 1.52%
techMARK (TASX) 4,337.17 1.71%
FTSE 100 - Risers
Scottish Mortgage Inv Trust (SMT) 776.00p 6.86%
Abrdn (ABDN) 156.55p 5.10%
Hargreaves Lansdown (HL.) 798.40p 4.61%
JD Sports Fashion (JD.) 118.35p 4.60%
Intermediate Capital Group (ICP) 1,342.50p 4.52%
Auto Trader Group (AUTO) 587.20p 4.26%
Informa (INF) 536.00p 4.20%
Halma (HLMA) 2,118.00p 4.18%
Experian (EXPN) 2,549.00p 4.17%
Schroders (SDR) 2,684.00p 4.11%
FTSE 100 - Fallers
Fresnillo (FRES) 685.60p -5.67%
Harbour Energy (HBR) 298.50p -5.60%
Standard Chartered (STAN) 578.20p -2.33%
Shell (SHEL) 1,974.20p -2.07%
BP (BP.) 368.65p -1.25%
Centrica (CNA) 75.28p -0.95%
HSBC Holdings (HSBA) 518.70p -0.84%
NATWEST GROUP PLC ORD 100P (NWG) 211.20p -0.80%
Meggitt (MGGT) 784.00p -0.61%
Barclays (BARC) 146.86p -0.42%
FTSE 250 - Risers
Trainline (TRN) 340.00p 20.61%
Chrysalis Investments Limited NPV (CHRY) 95.70p 6.33%
4Imprint Group (FOUR) 2,440.00p 6.32%
Discoverie Group (DSCV) 667.00p 6.21%
Baltic Classifieds Group (BCG) 138.40p 5.83%
Liontrust Asset Management (LIO) 912.00p 5.68%
IP Group (IPO) 70.40p 5.63%
Future (FUTR) 1,779.00p 5.27%
Watches of Switzerland Group (WOSG) 788.50p 5.13%
Bytes Technology Group (BYIT) 427.00p 5.07%
FTSE 250 - Fallers
Tullow Oil (TLW) 39.66p -6.20%
Energean (ENOG) 939.00p -5.28%
Hochschild Mining (HOC) 79.90p -3.73%
Diversified Energy Company (DEC) 107.30p -2.98%
Centamin (DI) (CEY) 76.08p -2.64%
Ferrexpo (FXPO) 119.60p -2.21%
Currys (CURY) 66.55p -1.99%
Drax Group (DRX) 624.50p -1.96%
Marks & Spencer Group (MKS) 135.00p -1.78%
Wood Group (John) (WG.) 142.60p -1.72%