London close: Stocks fall on back of weak services data

The FTSE 100 closed down 0.2% at 7,437.93 points, while the more domestically-focused FTSE 250 index fell 0.18% to end at 18,491.42.

Sterling was last down 0.31% against the dollar to trade at $1.2585, while it gained 0.26% on the euro to change hands at €1.1728.

"After an initially negative start, which saw the FTSE 100 and DAX slide to one-week lows on disappointing services PMI numbers, European markets have managed to recover from the lows of the day, with the FTSE 100 trying to rebound into positive territory helped by a strong performance from the energy sector,” said CMC Markets chief market analyst Michael Hewson.

“This came about in the wake of Saudi Arabia and Russia announcing they would be extending their output cuts into year end, pushing Brent crude oil prices back above $90 a barrel for the first time since November last year, giving a lift to BP and Shell in the process.

“Oilfield services company Weir Group is also higher.”

UK services sector contracts, new car sales surge, eurozone and China slow down

In economic news, business activity in the UK's services sector contracted for the first time since January according to fresh data.

It was largely attributed to elevated interest rates affecting client behaviour and limiting new business opportunities.

The S&P Global/CIPS services purchasing managers’ index (PMI) fell to 49.5 in August from 51.5 the previous month, dipping below the 50-point threshold that delineates contraction from expansion.

That decline was, however, better than initial forecasts had predicted.

The composite PMI, which also includes manufacturing, similarly contracted to 48.6, down from 50.8 in July.

“Service providers saw customer spending reverse course during August as higher borrowing costs, subdued business confidence, and stretched household finances all acted to curtail sales opportunities,” said Tim Moore, economics director at S&P Global Market Intelligence.

“After a modest recovery over the past six months, service sector businesses are now clearly feeling the impact of rising interest rates on client demand.

“Worries about the broader business climate also dampened spending in August, with firms suggesting that faltering UK economic growth and sticky inflation were weighing on the outlook.”

Conversely, the UK's automotive sector appeared to be on a different trajectory, with figures from the Society of Motor Manufacturers and Traders (SMMT) showing a 24.4% increase in new car registrations in August.

That still, however, lagged 7.5% behind pre-pandemic levels.

The majority of the growth was driven by fleet registrations, which soared by 58.4%, while private demand declined by 8.1%.

“With the automotive industry beginning a second year of growth, recovery is underway with EVs energising the market,” said SMMT chief executive Mike Hawes.

“But with a new zero emission vehicle mandate due to come into force in less than 120 days, manufacturers still await the details.”

On the continent, the eurozone was witnessing its fastest contraction rate in three years, with the composite PMI dropping to a 33-month low of 46.7.

That was notably lower than previous estimates, and the services PMI, in particular, fell to 47.9, further underscoring economic difficulties in the region.

Business activity in China's services sector meanwhile also decelerated, hitting its lowest point in eight months.

The Caixin/S&P PMI slipped to 51.8 in August, down from 54.1 in July, although it still remained above the 50-point expansion mark.

Down under, the Reserve Bank of Australia held its cash rate steady at 4.1%, signalling a measure of stability despite persistent inflationary pressures.

Outgoing governor Philip Lowe, in his last rate announcement, noted that inflation rates in the sunburnt country, although high, were on a declining trend.

Downgrades hit retail, energy firms struggle, oil and investments surge

On London’s equity markets, B&M European Value Retail fell 3.99% following a downgrade from 'overweight' to 'underweight' by JPMorgan Cazenove.

The company also announced the acquisition of up to 51 stores from the failed Wilko chain for £13m, although that did little to lift its stock.

Tesco also found itself on the weaker side, falling 2.81% after being downgraded from 'overweight' to 'neutral' by JPMorgan.

Equipment rental firm Ashtead Group declined 2.64% despite reporting record performance in its fiscal first quarter.

The company cut its forecast for UK growth, citing a "softening" market.

Outside the FTSE 350, oil producer EnQuest suffered a significant fall of 12.05% after announcing a first-half loss.

The company specifically pointed to the impact of the energy windfall tax as a contributing factor to its poor performance.

On the upside, Lancashire Holdings saw a 2.71% gain after an upgrade to ‘equalweight’ from ‘underweight’ by Morgan Stanley.

BP and Shell also experienced positive traction, increasing by 2.03% and 0.96% respectively, following news that Saudi Arabia would extend its oil production cuts through the end of the year.

“This was flagged last week to some extent but crude is fetching strong bids on the announcement,” said Neil Wilson, chief market analyst at Markets.com.

“Saudis will review monthly on whether to reduce or deepen the cut.”

Diversified Energy followed suit, gaining 3.34% as the higher oil prices affected the sector positively.

Caledonia Investments surged 1.77% after it announced the sale of its majority stake in Seven Investment Management (7IM) to the Ontario Teachers' Pension Plan Board for £255m.

John Wood Group continued to rise, adding another 4.86% after securing a services deal with Harbour Energy on Monday.

TI Fluid Systems saw a modest 0.8% gain after announcing its agreement to acquire Hungarian firm Cascade Engineering Europe for €25.4m (£21.7m ) in cash.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,437.93 -0.20%
FTSE 250 (MCX) 18,491.42 -0.18%
techMARK (TASX) 4,264.88 -0.24%

FTSE 100 - Risers

Whitbread (WTB) 3,565.00p 2.30%
Centrica (CNA) 156.00p 1.96%
BP (BP.) 511.50p 1.95%
Weir Group (WEIR) 1,896.50p 1.74%
InterContinental Hotels Group (IHG) 6,068.00p 1.44%
Vodafone Group (VOD) 73.45p 1.38%
Antofagasta (ANTO) 1,478.00p 1.16%
Shell (SHEL) 2,469.00p 1.00%
Admiral Group (ADM) 2,394.00p 0.97%
Relx plc (REL) 2,605.00p 0.81%

FTSE 100 - Fallers

B&M European Value Retail S.A. (DI) (BME) 547.80p -3.39%
Croda International (CRDA) 5,284.00p -3.37%
Ashtead Group (AHT) 5,310.00p -2.89%
Tesco (TSCO) 256.30p -2.84%
Ocado Group (OCDO) 857.80p -2.39%
Bunzl (BNZL) 2,766.00p -2.05%
Flutter Entertainment (CDI) (FLTR) 14,055.00p -2.02%
Johnson Matthey (JMAT) 1,718.50p -1.91%
Kingfisher (KGF) 227.60p -1.77%
Smith & Nephew (SN.) 1,036.50p -1.75%

FTSE 250 - Risers

Trainline (TRN) 248.60p 5.16%
Wood Group (John) (WG.) 164.10p 4.86%
Ithaca Energy (ITH) 147.20p 4.10%
Diversified Energy Company (DEC) 86.70p 3.34%
Just Group (JUST) 75.70p 2.71%
Mobico Group (MCG) 87.10p 2.47%
Molten Ventures (GROW) 246.80p 2.41%
Lancashire Holdings Limited (LRE) 584.50p 2.36%
Mitie Group (MTO) 100.60p 2.24%
Energean (ENOG) 1,183.00p 1.98%

FTSE 250 - Fallers

Ferrexpo (FXPO) 79.60p -4.73%
CMC Markets (CMCX) 102.40p -3.76%
W.A.G Payment Solutions (WPS) 90.00p -3.64%
Pennon Group (PNN) 614.50p -3.30%
Capita (CPI) 17.12p -2.51%
Synthomer (SYNT) 60.75p -2.49%
Hikma Pharmaceuticals (HIK) 2,119.00p -2.31%
Wetherspoon (J.D.) (JDW) 686.50p -2.14%
Baltic Classifieds Group (BCG) 208.00p -2.12%
Spirent Communications (SPT) 148.80p -1.85%