London open: Stocks fall amid recession fears; PMIs eyed

At 0835 BST, the FTSE 100 was down 0.7% at 7,040.69.

Richard Hunter, head of markets at Interactive Investor, said: "Markets remain on the back foot as the latest comments from the Federal Reserve did little to assuage investor concerns.

"Indeed, there seems no end in sight in the immediate future for this situation to change. Comments from Fed Reserve Chair Powell made their position clear. Interest rates will continue to rise, and at an accelerated pace, until there is ‘compelling evidence’ that inflation is beginning to wane.

"This in turn decreases the likelihood of a soft landing for the economy, which the Fed fully recognises. Of course, the central bank is not attempting to induce a recession, but the outcome of its current stance is increasingly likely to provide one.

"Indeed, some economists are already calculating the risk of a recession as having recently risen to around 50%, and the blunt tool of interest rate hikes may not of itself be sufficient. This round of inflation is not the result of overheating demand, but rather the lack of supply and low production capacity after the pandemic restart stalled. With supply chains in general still feeling the strain, the odds are stacked against a smooth glide path to recovery."

On home shores, market participants were mulling over the latest data from the Office for National Statistics, which showed that public sector borrowing exceeded forecasts in May after surging inflation pushed up debt interest costs.

Public sector net borrowing, excluding public sector banks, was £14.0bn last month, well above forecasts for £12.0bn and the third-highest May borrowing since records began in 1993. The figure was down £4.0bn on May 2021, but £8.5bn higher than May 2019, before the pandemic.

It was also £3.6bn higher than the Office for Budget Responsibility’s own forecast.

Central government receipts were £66.6bn, up £5.7bn on May 2021. Of that, £48.3bn were tax receipts, an £3.4bn annual increase. But debt interest was £7.6bn, up £3.1bn year-on-year and £2.5bn higher than the OBR’s expectations.

It was also the third-highest debt interest payment made by any central government in any single month on an accrued basis, and the highest payment made in May on record.

Still to come on the data front, the S&P Global/CIPS manufacturing and services PMIs for June are due at 0930 BST.

In equity markets, gambling and gaming group 888 Holdings tumbled as it said it expects interim revenues to be "broadly" in line with expectations. The Gibraltar-based firm, which is in the process of acquiring William Hill, said revenues were likely to come in between £330m and £335m for the six months to 30 June.

Trainline lost ground on news that chief financial officer Shaun McCabe was stepping down to join fast-fashion retailer Boohoo.

Intertek was knocked lower by a downgrade to ‘sell’ at Deutsche Bank, while FirstGroup was weaker after a downgrade to ‘hold’ at HSBC.

United Utilities and British Land were both in the red as they traded without entitlement to the dividend.

On the upside, Ocado was the standout gainer on the FTSE 100, having tumbled on Wednesday, likely on expectations that it will lose out to discounters such as Aldi and Lidl as the cost-of-living crisis intensifies.

Elsewhere, Rentokil was boosted by an upgrade to ‘buy’ at Deutsche Bank.

Market Movers

FTSE 100 (UKX) 7,040.69 -0.68%
FTSE 250 (MCX) 18,815.66 -0.40%
techMARK (TASX) 4,209.25 -0.45%

FTSE 100 - Risers

Ocado Group (OCDO) 845.00p 3.07%
Avast (AVST) 527.20p 1.97%
JD Sports Fashion (JD.) 114.40p 1.62%
Prudential (PRU) 950.60p 1.46%
Rentokil Initial (RTO) 465.90p 1.28%
BT Group (BT.A) 182.95p 0.61%
Hikma Pharmaceuticals (HIK) 1,509.50p 0.47%
Smith (DS) (SMDS) 286.90p 0.38%
CRH (CDI) (CRH) 2,782.50p 0.36%
Centrica (CNA) 83.46p 0.31%

FTSE 100 - Fallers

United Utilities Group (UU.) 978.00p -4.03%
British Land Company (BLND) 487.40p -3.52%
Antofagasta (ANTO) 1,195.50p -3.38%
Fresnillo (FRES) 789.60p -2.90%
Airtel Africa (AAF) 134.10p -2.84%
Pershing Square Holdings Ltd NPV (PSH) 2,405.00p -2.83%
Melrose Industries (MRO) 148.15p -2.28%
Intertek Group (ITRK) 4,250.00p -2.12%
Rolls-Royce Holdings (RR.) 84.05p -2.11%
Anglo American (AAL) 3,127.00p -2.03%

FTSE 250 - Risers

Capricorn Energy (CNE) 217.80p 2.83%
Polymetal International (POLY) 185.00p 2.33%
ASOS (ASC) 872.50p 2.27%
Allianz Technology Trust (ATT) 212.50p 2.16%
Savills (SVS) 1,049.00p 1.65%
Ascential (ASCL) 268.80p 1.58%
Apax Global Alpha Limited (APAX) 184.00p 1.32%
Target Healthcare Reit Ltd (THRL) 113.00p 1.25%
HGCapital Trust (HGT) 349.00p 1.16%
Fidelity China Special Situations (FCSS) 267.00p 1.14%

FTSE 250 - Fallers

888 Holdings (888) 164.90p -5.65%
Trainline (TRN) 302.70p -4.70%
Micro Focus International (MCRO) 286.70p -4.31%
TUI AG Reg Shs (DI) (TUI) 152.40p -2.99%
FirstGroup (FGP) 133.90p -2.65%
Tullow Oil (TLW) 48.50p -2.61%
TR Property Inv Trust (TRY) 375.50p -2.47%
JPMorgan European Discovery Trust (JEDT) 370.50p -2.37%
Wood Group (John) (WG.) 172.25p -2.32%
FDM Group (Holdings) (FDM) 859.00p -2.28%