London close: Stocks fall on a raft of poor PMI data

The FTSE 100 closed down 0.61% at 7,488.11, and the FTSE 250 was off 0.99% at 19,306.89.

Sterling was in positive territory, meanwhile, last rising 0.74% on the dollar to $1.1854, and strengthening 0.31% against the euro to change hands at €1.1871.

“It’s been another day of poor economic data for European markets with the latest flash manufacturing PMI numbers falling into contraction territory for Germany, France, and the UK,” said CMC Markets chief market analyst Michael Hewson.

“While the economic data has been poor the reaction of markets has been slightly more ambivalent and a little mixed, with the DAX and CAC 40 treading water, having opened just above three-week lows.”

Hewson said the FTSE 100 was underperforming, although Wednesday’s weakness could have more to do with the fact that it had managed to perform better than its peers over the last week, and was playing “catch-down”.

“The rebound in the oil price is helping to underpin the energy sector with Shell and BP edging higher, while copper prices at six-week highs are giving a lift to Antofagasta and Anglo American.”

In economic news, the UK economy practically ground to a halt in August amid a slump in manufacturing activity, according to the S&P/CIPS flash composite output purchasing manager’s index (PMI).

The index, which measures activity in the manufacturing and services sectors, fell to an 18-month low of 50.9, from 52.1 in July.

That was just above the 50.0 mark that separates contraction from expansion, and was the worst reading since the Covid lockdown in February 2021.

The services PMI nudged down to 52.5 in August from 52.6 the month before, while the manufacturing output index declined to a 27-month low of 42.4 from 48.9, and the wider manufacturing PMI declined into contraction territory to 46.0, from 52.1 in July.

“The UK private sector moved closer to stagnation in August, as mild growth of activity across the service sector only just offset a deepening downturn at manufacturers,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence.

“Waning customer demand amid the weaker economic outlook, and shortages of both staff and inputs, were reported to have hit goods producers hard, with firms registering the quickest drops in output and new work since May 2020.

“Excluding the initial phase of the pandemic in early-2020, the reduction in manufacturing output was the quickest seen since the start of 2009."

Fiddes said meanwhile, the service sector registered the weakest increase in activity since the recovery began in early 2021.

“More encouragingly, the latest survey also pointed to a further easing of inflationary pressure, with average input costs rising at the softest rate for nearly a year.

“Though still well above the historical average, the moderation in cost pressures will provide some relief to Bank of England policymakers who are keen to tame inflation, which is currently at a four-decade high.”

That data was backed up by the Confederation of British Industry's industrial trends survey, which revealed a drop in the output balance from +6% for the three months to July, to -7% now - marking the first fall since February 2021.

“From rising prices to bottlenecks in supply chains, manufacturers continue to operate against a background of high input costs and significant operational delays," said CBI lead economist Alpesh Paleja.

"When coupled with an oncoming economic downturn, it’s not surprising to see orders and activity ebb away as we move through the year."

On the continent, eurozone business activity continued to contract in August as growth in the services sector ground to a near-halt, according to a survey released on Tuesday.

The S&P Global flash eurozone composite PMI fell to an 18-month low of 49.2 in August from 49.9 in July, with the services PMI activity index declining to 50.2 from 51.2, hitting a 17-month low.

Meanwhile, the manufacturing output PMI ticked up to a two-month high of 46.5, from 46.3.

Turning stateside, private sector firms in the US reported the fastest pace of declines in output in August since the first outbreaks of Covid-19 pandemic.

S&P Global's composite output PMI fell from a to 45.0 for August reading of 47.4 in July - a 27-month low.

The flash services business activity index declined to 44.1 from 47.3, missing economists' forecasts for a rebound to 50.2, while the headline manufacturing PMI was closer to the mark, retreating to 51.3 from 52.2, but still below expectations for 52.0.

“One area of reprieve for firms came in the form of a further softening in inflationary pressures. Input prices and output charges rose at the slowest rates for a year-and-a-half amid reports that some key component costs had fallen,” said S&P Global senior economist Sian Jones.

“Although pointing to an ongoing movement away from price peaks, increases in costs and charges remained historically robust.

“At the same time, delivery times lengthened at the slowest pace since October 2020, albeit still sharply, allowing more firms to work through backlogs.”

Finally on data, the pace of new home sales in the US fell to below pre-pandemic on the back of another outsized drop.

According to the US Department of Commerce, the pace of new home sales fell at a seasonally-adjusted 12.6% month-on-month in July, to reach 511,000, against forecasts for 580,000.

The number of homes available for sale, measured in months worth of sales, leapt to 11.2 from 9.1, while the median sales price rebounded to $439,400 from $414,900 in July.

On London’s equity markets, Wood Group lost 2.43% by the close, after it posted a decline in first-half operating profit as revenue dipped.

In the six months ended 30 June, operating profit before exceptional items fell 8.9% to $41m, with revenue down 0.4% to $2.6bn.

The consulting division saw revenues rise 2% thanks to increased demand for the company’s energy solutions, while the operations segment saw revenues grow 18%, supported by an improved market for oil and gas.

However, as expected, revenue in the projects arm fell 15% as Wood Group continued to see the impact from its move away from large-scale projects and as customer investment was yet to fully pick up.

Elsewhere, airlines that operate at Gatwick failed to excite amid mixed messages over the state of operations at London’s second airport.

British Airways owner IAG was down 0.5%, and low-cost carrier easyJet closed flat, after 26 of the latter’s flights were cancelled by the airport operator at the last minute on Wednesday morning due to a lack of staff.

That came on the back of an announcement from Gatwick that it would not need to extend its capacity constraints into September, describing operations as “business as usual”.

On the upside, BT Group was 0.51% higher after it said the UK government would not take any action over French billionaire and Altice owner Patrick Drahi’s stake in the telecoms group.

Drahi increased his stake in BT in November 2021 last year to 18% from 12.1% through Altice, making him the biggest shareholder.

That prompted the UK government to review the investment on the grounds of national security.

Shell was up 3.28% and BP rose 2.32% on the back of buoyant crude prices, while rising prices for copper lifted Anglo American by 3.14% and Antofagasta 3.29%.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,488.11 -0.61%
FTSE 250 (MCX) 19,306.89 -0.99%
techMARK (TASX) 4,232.81 -1.42%

FTSE 100 - Risers

Harbour Energy (HBR) 423.80p 4.38%
Antofagasta (ANTO) 1,162.00p 3.29%
Shell (SHEL) 2,317.50p 3.28%
Anglo American (AAL) 2,943.50p 3.14%
Glencore (GLEN) 506.00p 2.80%
BP (BP.) 459.40p 2.32%
Rio Tinto (RIO) 5,045.00p 2.13%
Haleon (HLN) 267.80p 1.71%
Endeavour Mining (EDV) 1,810.00p 1.69%
Flutter Entertainment (CDI) (FLTR) 10,850.00p 1.54%

FTSE 100 - Fallers

Ocado Group (OCDO) 798.80p -5.02%
Informa (INF) 542.60p -4.40%
Smiths Group (SMIN) 1,509.00p -3.70%
Sage Group (SGE) 712.60p -3.28%
Relx plc (REL) 2,364.00p -3.11%
London Stock Exchange Group (LSEG) 8,334.00p -2.89%
JD Sports Fashion (JD.) 115.80p -2.85%
B&M European Value Retail S.A. (DI) (BME) 396.70p -2.82%
Airtel Africa (AAF) 137.20p -2.76%
Halma (HLMA) 2,165.00p -2.74%

FTSE 250 - Risers

Tullow Oil (TLW) 51.55p 5.98%
Energean (ENOG) 1,371.00p 4.90%
Petrofac Ltd. (PFC) 123.00p 3.36%
TP Icap Group (TCAP) 159.90p 2.90%
Aston Martin Lagonda Global Holdings (AML) 479.00p 2.59%
Hochschild Mining (HOC) 71.15p 2.52%
BlackRock World Mining Trust (BRWM) 615.00p 2.51%
TUI AG Reg Shs (DI) (TUI) 132.15p 2.40%
Ferrexpo (FXPO) 146.60p 2.30%
Diversified Energy Company (DEC) 141.00p 2.10%

FTSE 250 - Fallers

Morgan Advanced Materials (MGAM) 265.00p -7.02%
Greencore Group (CDI) (GNC) 86.35p -6.75%
Essentra (ESNT) 220.00p -5.78%
Clarkson (CKN) 3,045.00p -5.14%
HGCapital Trust (HGT) 355.50p -4.95%
Auction Technology Group (ATG) 832.00p -4.81%
Watches of Switzerland Group (WOSG) 789.50p -4.65%
Dr. Martens (DOCS) 237.00p -4.59%
SSP Group (SSPG) 214.10p -4.38%
Workspace Group (WKP) 542.50p -3.93%