London close: Stocks sink on growing concerns for global economy

The FTSE 100 ended the session down 2.32% at 7,216.58, and the FTSE 250 was off 2.59% at 19,306.72.

Sterling was also in negative territory, last trading down 0.07% on the dollar at $1.2339, and slipping 0.16% against the euro to €1.1680.

“Stock markets are enduring large losses due to concerns about rising inflation, higher interest rates and the war in Ukraine,” said Equiti Capital market analyst David Madden.

“Last week, the Reserve Bank of Australia, the Federal Reserve and the Bank of England hiked interest rates.

“The central banks all cited rising inflation as a motivation behind the hikes.”

Madden said the increase in the cost of borrowing in those countries will only compound the cost-of-living crisis.

“When costs are high for a prolonged period, that can chip away at demand as people have less disposable income.

“Even though the European Central Bank has not hiked rates since 2011, there are growing calls for the bank to raise rates in July.

“This comes at a time when it seems the eurozone economy is stagnating.”

David Madden also noted that last Thursday, the Bank of England “set the cat amongst the pigeons” as they predicted the UK economy would contract by 0.25% next year.

“There are growing worries the global economy is moving down a gear.”

On the economic front, Chinese trade weakened last month after Shanghai and other major industrial cities were locked down amid a resurgence of Covid-19, with export growth tumbling to its lowest level in almost two years.

China's export growth slumped in April, up just 3.7% year-on-year to $273.6bn, down from March's growth increase of 15.7% for the first single-digit increase in 18 months, while imports ticked up 0.7% to $222.5bn amid ongoing Covid-19 lockdowns, in line with the previous month.

According to the General Administration of Customs, China's global trade surplus widened by 19.4% to $51.1bn, the largest trade surplus since January, while the superpower's volatile surplus with the US was cut by 65% to $9.8bn.

Closer to home, a closely-watched survey showed investor confidence slumping in the eurozone, as the war in Ukraine pushed the region towards recession.

The Sentix economic index was -22.06 in May, the third consecutive decline and the lowest since June 2020.

Within that, the current situation index fell to -10.5 in May from -5.5 a month earlier, while the expectations index slid from -29.8 to -34.0, the lowest since the end of 2008.

“The recession is becoming visible,” said Manfred Hubner, managing director of Sentix.

“The traces of the Ukraine conflict are becoming increasingly visible in the economy.

“The sanctions against Russia are having an effect on enemies and friends alike.”

Hubner said last month, the first mover economic index pointed the way towards recession, adding that at the start of May, the downturn deepened further.

“In other words, it’s coming thick and fast.”

In central bank news from across the pond, a top official defended the Federal Reserve's recent decision to raise official short-term interest rates by 50-basis points earlier in the afternoon, instead of acting even more forcefully.

In an interview with Bloomberg, the president of the Atlanta Federal Reserve Raphael Bostic said that the most recent 50-basis point hike on 16 March "is already a pretty aggressive move".

"I don’t think we need to be moving even more aggressively. I think we can stay at this pace and this cadence and really see how the markets evolve," he added.

At the same mid-March policy meeting, Fed chairman, Jerome Powell, pushed back on calls from some quarters to hike rates by 75 basis points.

In equity markets, miners were under pressure after Chinese trade data, with Glencore down 5.96%, Antofagasta losing 6.52%, Rio Tinto falling 4.63%, and Anglo American off 5.4%.

Energean reversed earlier gains to close down 0.84% after the energy explorer and developer said its Athena well had made a commercial gas discovery off the coast of Israel.

Property firms Shaftesbury and Capital & Counties were both weaker, falling 2.95% and 6.89% respectively, after they confirmed they were in advanced discussions about a possible merger.

“The possible merger would create a REIT focused on the West End of London with a portfolio of circa 2.9 million square feet of lettable space located in high-profile destinations including Covent Garden, Carnaby, Chinatown and Soho,” the companies said in a joint statement, in response to press speculation over the weekend.

“The combined ownership would comprise 1.8 million square feet of retail and hospitality space, together with office and residential accommodation of 1.1 million square feet.”

Elsewhere, Rightmove sank 3.36% after it announced that chief executive Peter Brooks-Johnson would step down from the board and leave the company in the coming year.

On the upside, cybersecurity specialist NCC Group gained 3.68% after it announced the appointment of a new chief executive, and lifted its revenue guidance for the second half of the year.

Retailers were also on the rise, with B&Q owner Kingfisher up 2.11%, and supermarket chains J Sainsbury and Tesco growing a respective 2.24% and 1.51%.

“UK retailers took a big hit last week and there seems to have been a flurry of bargain hunters rushing through the aisles of London’s markets today,” AJ Bell’s Danni Hewson said.

“Tesco and Sainsbury might well be enjoying a vicarious boost from the bun fight underway for corner shop grocer McColl’s, but when you add Kingfisher, B&M, Next and Moonpig into the mix it seems investors in London at least are thinking long term.

“But with commodity prices down and miners still being buffeted by disappointing data out of China neither the FTSE 100 nor its stablemate the FTSE 250 could muster any forward momentum.”

Defence technology firm Qinetiq jumped 4.76%, with traders pointing to the ongoing conflict in Ukraine.

Insurer Beazley was ahead 2.7% after Berenberg lifted its price target on the stock to 630p from 610p, and said it remained its top pick in the London market.

"We struggle to find any negatives from Beazley’s first quarter trading statement," the bank said.

Market Movers

FTSE 100 (UKX) 7,216.58 -2.32%
FTSE 250 (MCX) 19,306.72 -2.59%
techMARK (TASX) 4,215.03 -1.92%

FTSE 100 - Risers

Sainsbury (J) (SBRY) 233.00p 2.24%
Kingfisher (KGF) 242.00p 2.11%
Tesco (TSCO) 275.50p 1.51%
Coca-Cola HBC AG (CDI) (CCH) 1,563.00p 1.23%
Unilever (ULVR) 3,636.00p 1.08%
Hargreaves Lansdown (HL.) 854.00p 1.04%
B&M European Value Retail S.A. (DI) (BME) 461.10p 0.13%
British American Tobacco (BATS) 3,302.00p 0.06%
Meggitt (MGGT) 778.00p 0.00%
National Grid (NG.) 1,179.00p -0.04%

FTSE 100 - Fallers

Entain (ENT) 1,248.50p -8.94%
Scottish Mortgage Inv Trust (SMT) 777.00p -6.66%
Antofagasta (ANTO) 1,362.00p -6.52%
Glencore (GLEN) 458.55p -5.96%
Flutter Entertainment (CDI) (FLTR) 7,958.00p -5.93%
Halma (HLMA) 2,210.00p -5.80%
Anglo American (AAL) 3,300.00p -5.40%
Whitbread (WTB) 2,561.00p -5.29%
Melrose Industries (MRO) 107.60p -5.20%
BP (BP.) 404.80p -5.12%

FTSE 250 - Risers

Polymetal International (POLY) 265.00p 5.16%
QinetiQ Group (QQ.) 356.80p 4.76%
NCC Group (NCC) 191.80p 3.68%
Beazley (BEZ) 441.80p 2.70%
Clipper Logistics (CLG) 866.00p 2.00%
Hiscox Limited (DI) (HSX) 942.00p 1.66%
AJ Bell (AJB) 253.60p 1.60%
Moonpig Group (MOON) 204.00p 1.49%
Moneysupermarket.com Group (MONY) 170.60p 0.89%
Vivo Energy (VVO) 147.00p 0.82%

FTSE 250 - Fallers

Chrysalis Investments Limited NPV (CHRY) 128.80p -12.02%
Tullow Oil (TLW) 50.95p -11.62%
Ferrexpo (FXPO) 136.70p -10.18%
Aston Martin Lagonda Global Holdings (AML) 748.40p -9.81%
Carnival (CCL) 1,074.00p -9.67%
Bellevue Healthcare Trust (Red) (BBH) 147.00p -8.81%
Allianz Technology Trust (ATT) 220.00p -7.95%
Harbour Energy (HBR) 473.70p -7.44%
Trainline (TRN) 290.40p -6.89%
Capital & Counties Properties (CAPC) 154.00p -6.89%