London close: Stocks weaker as economic data disappoints

The FTSE 100 ended the session down 0.67% at 7,618.31, and the FTSE 250 was off 0.28% at 21,115.08.

Sterling was also in the red, last falling 0.01% on the dollar to $1.3024, and weakening 0.06% against the euro to trade at €1.1975.

“The FTSE 100 has also had a poor start to the week with the decline in oil prices weighing on the energy sector as concerns grow about a sharp drop in demand in China, as a result of the draconian Covid restrictions being implemented in Shanghai,” said CMC Markets chief market analyst Michael Hewson.

“Concerns about rising energy prices are front of mind for investors this week with the latest CPI inflation reports for the UK, Germany and the US due tomorrow and all expected to hit multi year highs, thus putting further pressure on central banks to tighten policy faster.

“On the plus side, a pickup in passenger numbers through Heathrow in March, to their best levels since the pandemic began, has given the likes of IAG a lift, despite the various Covid-related problems being experienced at UK airports.”

On the economic front, figures from the Office for National Statistics showed UK growth slowing more than expected in February.

GDP rose 0.1% on the month in February, down from 0.8% in January and coming in below consensus expectations of 0.3% growth.

That left the economy 1.5% above its pre-coronavirus level in February 2020.

The services sector grew by 0.2% and was the main contributor to February's GDP growth - partially offset by production, which fell by 0.6%, and construction, which dipped 0.1%.

Darren Morgan, director of economic statistics at the ONS, said growth was also held back by a reduction in the NHS Test and Trace and vaccination programmes, which had contributed strongly to GDP at the start of the year.

“The pace of the recovery was already going to slow once the post-Omicron bounce faded and the squeeze on household real incomes intensified,” said Ruth Gregory, senior UK economist at Capital Economics.

“But we hadn’t expected it to slow so much so soon.”

Gregory said Capital was now picking the economy to have grown by 1% quarter-on-quarter as a whole, down from its previous estimate of 1.1%, with the risks for growth of 0.2% quarter-on-quarter in the second quarter now tilted to the downside.

“Even so, with high inflation feeding through into higher price/wage expectations, we doubt this will prevent the Bank of England from raising interest rates further to 1.00% at its next meeting on 5 May, and to 2.00% next year.”

ING economist James Smith, meanwhile, said first-quarter GDP growth was looking to come in at roughly 1%, before turning negative in the second quarter.

“We expect a small contraction of -0.2% to -0.3%, though for now, the jury’s out on whether that evolves into a technical recession,” Smith noted.

“With the growth backdrop deteriorating, we expect the Bank of England to pause its tightening cycle by the summer following one or two more 25bp rate rises.

“Policymakers subtly began to lay the groundwork for this at the March meeting, where the overall tone was more cautious and the decision to raise rates was not unanimous.”

Elsewhere, inflation in China hit a three-month high in March amid supply chain issues and Covid lockdowns, and following Russia’s invasion of Ukraine, according to data released on Monday by the National Bureau of Statistics.

Annual consumer price inflation rose to 1.5% from 0.9% in February, coming in above analysts’ expectations of 1.2%.

Meanwhile, producer price inflation fell to 8.3% on the year in March from 8.8% in February, coming in above forecasts for an 8.1% jump.

“China is not entirely immune to global price shocks, despite an enviably low rate of inflation compared to almost every other major economy,” said Craig Botham, chief China economist at Pantheon Macroeconomics.

“Rising food and energy prices proved more than enough to offset weaker core inflation in March, though the food story is at least partially about base effects.”

In equity markets, Wood Group surged 12.66% after it said underlying results for FY21 remain in line with the guidance provided on 13 January.

The shares also benefited from an upgrade to ‘hold’ from ‘underperform’ at Jefferies.

Information and data company Ascential rose 2.11% after it confirmed it was considering a break-up of the group.

The announcement came after a Sky News report, citing unnamed sources as saying that Ascential, which has a market capitalisation of £1.49bn, is working with investment bankers on plans to demerge its digital operations and list them separately in the US.

Shares in low-cost airlines Wizz Air and easyJet gained 6.85% and 3.71%, respectively, as oil prices fell on fears of reduced demand from China.

Education publisher Pearson was ahead 2.1% after Goldman Sachs said in a note on internet and media shares that it was among the most attractive buy-rated names in a stagflationary environment.

Elsewhere on the broker note front, Irn-Bru maker AG Barr fizzed 0.93% higher after an upgrade to ‘buy’ at Berenberg, while J Sainsbury was boosted 1.92% by an upgrade to ‘buy’ at Jefferies.

Pets at Home Group was 1.22% higher after Berenberg lowered its target price to 510.0p from 570p and maintained a 'buy' rating on the stock, acknowledging that the group had an "exceptional" 2022 trading year.

On the downside, advertising giant WPP was 1.62% weaker after a downgrade to ‘neutral’ at Goldman Sachs, while Aston Martin Lagonda tumbled 6.69% after Goldman cut its price target on the shares.

Market Movers

FTSE 100 (UKX) 7,618.31 -0.67%
FTSE 250 (MCX) 21,115.08 -0.28%
techMARK (TASX) 4,410.47 -0.07%

FTSE 100 - Risers

BAE Systems (BA.) 765.00p 2.88%
International Consolidated Airlines Group SA (CDI) (IAG) 136.48p 2.49%
Pearson (PSON) 778.20p 2.10%
Smurfit Kappa Group (CDI) (SKG) 3,130.00p 1.95%
Sainsbury (J) (SBRY) 251.10p 1.82%
Tesco (TSCO) 275.20p 1.44%
NATWEST GROUP PLC ORD 100P (NWG) 219.00p 1.20%
Vodafone Group (VOD) 130.82p 1.19%
Flutter Entertainment (CDI) (FLTR) 8,494.00p 1.17%
Lloyds Banking Group (LLOY) 45.08p 1.11%

FTSE 100 - Fallers

Prudential (PRU) 1,059.00p -3.95%
Experian (EXPN) 2,798.00p -3.75%
Halma (HLMA) 2,453.00p -3.55%
Hargreaves Lansdown (HL.) 994.60p -3.48%
Ashtead Group (AHT) 4,548.00p -2.80%
Scottish Mortgage Inv Trust (SMT) 946.60p -2.71%
Antofagasta (ANTO) 1,663.00p -2.61%
Severn Trent (SVT) 3,052.00p -2.52%
Anglo American (AAL) 4,070.50p -2.40%
Croda International (CRDA) 7,722.00p -2.38%

FTSE 250 - Risers

Wood Group (John) (WG.) 174.45p 12.66%
Wizz Air Holdings (WIZZ) 2,915.00p 6.85%
easyJet (EZJ) 542.60p 3.71%
WH Smith (SMWH) 1,485.50p 2.73%
QinetiQ Group (QQ.) 325.40p 2.65%
BH Macro Ltd. GBP Shares (BHMG) 4,270.00p 2.52%
Hochschild Mining (HOC) 136.00p 2.49%
HGCapital Trust (HGT) 432.00p 2.13%
Ascential (ASCL) 338.00p 2.11%
Urban Logistics Reit (SHED) 196.00p 2.08%

FTSE 250 - Fallers

Polymetal International (POLY) 275.10p -7.06%
Aston Martin Lagonda Global Holdings (AML) 811.60p -6.69%
Ferrexpo (FXPO) 174.40p -6.14%
Johnson Matthey (JMAT) 1,867.00p -4.99%
AJ Bell (AJB) 308.80p -4.16%
Baillie Gifford US Growth Trust (USA) 226.50p -4.03%
Genus (GNS) 2,692.00p -3.95%
Kainos Group (KNOS) 1,264.00p -3.66%
Apax Global Alpha Limited (APAX) 200.00p -3.38%
Weir Group (WEIR) 1,539.50p -3.24%