London close: Profit-taking sees stocks close weaker
London stocks closed in the red on Thursday, as investors took some profits following eight consecutive days of gains, amid a raft of corporate news and the latest UK GDP reading.
The FTSE 100 ended the session down 0.68% at 6,338.94, and the FTSE 250 was off 0.2% at 19,302.17.
Sterling was also in negative territory, last falling 0.61% on the dollar to $1.3142, and weakening 0.94% against the euro to €1.1122.
The top-flight index had rallied sharply earlier in the week, on news that the Covid-19 vaccine being developed by Pfizer and BioNTech had shown 90% efficacy.
“The Pfizer-led surge in equity prices seen throughout much of the week appears to have finally come to an end, with stocks on either side of the Atlantic trading in the red,” said IG senior market analyst Joshua Mahony.
“Coming off the back of an impressive eight consecutive days of gains, the FTSE 100 has been led lower by weakness from Rolls-Royce and the banking sector.”
Mahony said that, despite hopes of a recovery in the wake of the Pfizer announcement, a £2bn rights issue from Rolls-Royce highlighted the ongoing battle to stay afloat for many of the hardest-hit stocks.
“The shift into value seen over much of the week does appear to stop here, with traders taking stock over exactly what is and isn’t justified as a long-term recovery play.”
Investors were also mulling over the latest GDP figures from the Office for National Statistics, which showed the economy grew by a record 15.5% in the third quarter as lockdown measures were eased, but slowed in September.
Although the quarterly growth reflected some recovery of activity following the record contraction seen in the second quarter, the economy was still 9.7% below where it was at the end of last year.
Analysts had been expecting growth of 15.8% in the third quarter.
Between April and June, GDP contracted 19.8%.
Compared with the same quarter a year ago, GDP fell by 9.6%, following a 21.5% contraction in the previous quarter.
Output in the services, production and construction sectors increased by record amounts in the third quarter but remained below levels seen in the fourth quarter of last year, before the pandemic hit.
On the month, GDP growth slowed to just 1.1% in September from a revised 2.2% in August, missing consensus expectations of 1.5% growth.
Analysts warned the economy was set to shrink again as a result of the second lockdown that began in England earlier in the month.
“September and the third quarter feel not just like old news, but like ancient news,” said Thomas Pugh, UK economist at Capital Economics.
“We already know that GDP will struggle to rise in October as tighter restrictions were imposed, and that it will take a hammering in November as the effects of the second Covid-19 lockdown are felt.”
ING economist James Smith said there would be a sharp decline to follow the third-quarter GDP bounceback.
"We expect a 6% to 7% decline in UK GDP through November, rendering the unprecedented bounce-back we saw in the third quarter 'old news'," he said.
"We expect the latest lockdowns to leave the size of the UK economy some 15% below pre-virus levels, as of November.”
In equity markets, Qinetiq and Hill & Smith were on the front foot, rising 11.07% and 2% respectively, after well-received updates.
Supermarket J Sainsbury clawed back earlier losses to finish 1.76% firmer, after its shares went ex-dividend.
On the downside, Shell remained in the red, closing down 1.12% as its stock also reached ex-dividend status.
Burberry Group reversed earlier gains to close down 2.27%, after it posted a 75% drop in first-half profit driven by the Covid-19 crisis.
The luxury brand said it had seen an improvement in sales in the second quarter and that revenue would be affected by fewer markdowns.
Legal & General lost 1.91% after saying it planned an unchanged dividend for 2020 and for the payout to increase more slowly than earnings and cash generation over five years.
The insurer and asset manager said its "ambition" remained for annual operating profit to be broadly in line with 2019's result of £2.3bn.
Elsewhere, National Express and Vesuvius also fell, by 1.75% and 0.83% respectively, after trading updates.
Market Movers
FTSE 100 (UKX) 6,338.94 -0.68%
FTSE 250 (MCX) 19,302.17 -0.20%
techMARK (TASX) 3,955.34 -0.07%
FTSE 100 - Risers
Fresnillo (FRES) 1,125.00p 3.73%
3i Group (III) 1,111.00p 2.49%
DCC (DCC) 5,850.00p 2.49%
Flutter Entertainment (FLTR) 13,705.00p 2.05%
Experian (EXPN) 3,171.00p 1.99%
Polymetal International (POLY) 1,681.50p 1.88%
Rentokil Initial (RTO) 552.20p 1.77%
Bunzl (BNZL) 2,483.00p 1.76%
Hikma Pharmaceuticals (HIK) 2,658.00p 1.72%
Smiths Group (SMIN) 1,496.50p 1.66%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 90.00p -8.56%
HSBC Holdings (HSBA) 372.50p -3.90%
Sainsbury (J) (SBRY) 202.30p -3.34%
St James's Place (STJ) 1,070.00p -3.21%
Croda International (CRDA) 6,298.00p -2.81%
Smurfit Kappa Group (SKG) 3,202.00p -2.79%
Standard Chartered (STAN) 416.50p -2.73%
International Consolidated Airlines Group SA (CDI) (IAG) 144.75p -2.66%
WPP (WPP) 725.40p -2.47%
Pennon Group (PNN) 1,054.00p -2.41%
FTSE 250 - Risers
QinetiQ Group (QQ.) 323.20p 11.07%
PureTech Health (PRTC) 261.00p 9.89%
AO World (AO.) 420.50p 4.60%
Serco Group (SRP) 119.10p 4.57%
Caledonia Investments (CLDN) 2,920.00p 4.29%
Fisher (James) & Sons (FSJ) 1,006.00p 3.95%
Grafton Group Ut (GFTU) 816.00p 3.68%
Sabre Insurance Group (SBRE) 262.00p 3.56%
Drax Group (DRX) 321.00p 3.41%
Helios Towers (HTWS) 180.80p 3.31%
FTSE 250 - Fallers
Spirent Communications (SPT) 252.50p -11.09%
Cineworld Group (CINE) 43.47p -9.59%
Wetherspoon (J.D.) (JDW) 1,034.00p -7.68%
TBC Bank Group (TBCG) 1,130.00p -6.46%
Carnival (CCL) 1,067.00p -5.03%
Morgan Sindall Group (MGNS) 1,338.00p -4.43%
Rank Group (RNK) 126.00p -4.40%
Mitchells & Butlers (MAB) 213.00p -4.27%
Airtel Africa (AAF) 76.00p -4.16%
Watches of Switzerland Group (WOSG) 458.50p -4.08%