London open: Stocks fall as IMF downgrades UK growth forecast

At 0820 GMT, the FTSE 100 was down 0.3% at 7,763.38.

The IMF said UK GDP was set to shrink 0.6% this year, down 0.9 percentage point from October’s forecast and the worst outlook for any G7 country this year.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "This is a direct contrast to other major economies who have seen their outlooks upgraded because of resilient consumer demand. The UK is facing some specific problems, including its over-exposure to high energy retail prices, which are weighing on household budgets.

"The UK also has a significant labour problem, which was initially caused by Brexit but has been made worse by a shrinking workforce since the pandemic. Mortgage rates are also prohibitively high in the UK which adds further pressure to the economy because it limits how much money people will spend on non-essentials.

"Ultimately, the UK has a productivity and demand problem, which when put together creates a very difficult environment. There’s a chance the UK could muster a better performance than the IMF is predicting, given upgrades to expectations from other bodies in recent months. The market will remain very sensitive to interest rate and inflation readings until we have a clear path out of the stagnation."

Market participants were also mulling better-than-expected data out of China, which showed that economic activity expanded in January after four months of contraction as the economy reopened from strict zero-Covid curbs.

The official purchasing managers’ index for manufacturing, which measures factory activity, jumped to 50.1 in January from 47 in December, according to the National Bureau of Statistics.

This marked the first time the gauge has crossed the 50 mark that separates contraction from expansion since September.

There was a bigger-than-expected jump in the non-manufacturing PMI, which came in at 54.4 in January, higher than the consensus of 52.0, and sharply up from the 41.6 reading in December.

In equity markets, Pets at Home surged as it lifted its full-year profit guidance following record third-quarter consumer revenues. The pet retailer now expects FY23 group underlying pre-tax profit to be towards the upper end of the consensus range of £126m to £136m, up from previous guidance of around £131m.

Irn-Bru and Rubicon maker AG Barr fizzed higher after saying it was set to deliver full-year profit "slightly ahead" of current market expectations following a strong second-half sales performance.

Johnson Matthey gained after inking a long-term strategic partnership to supply Plug Power with the advanced materials necessary for its fuel cells and electrolysers from 2023.

In broker note action, caterer Compass Group was boosted by an upgrade to ‘buy’ at HSBC, while advertising giant WPP rose after an upgrade to ‘overweight’ at Barclays.

On the downside, JD Wetherspoon was knocked lower by a downgrade to ‘hold’ at HSBC.

Market Movers

FTSE 100 (UKX) 7,763.38 -0.28%
FTSE 250 (MCX) 19,889.09 -0.24%
techMARK (TASX) 4,452.82 -0.15%

FTSE 100 - Risers

Compass Group (CPG) 1,942.00p 1.86%
Johnson Matthey (JMAT) 2,195.00p 1.25%
BAE Systems (BA.) 865.20p 1.10%
Kingfisher (KGF) 281.90p 1.00%
Diageo (DGE) 3,443.00p 0.95%
WPP (WPP) 952.20p 0.78%
Coca-Cola HBC AG (CDI) (CCH) 1,952.50p 0.57%
Centrica (CNA) 101.00p 0.55%
Aviva (AV.) 459.30p 0.53%
Phoenix Group Holdings (PHNX) 638.00p 0.44%

FTSE 100 - Fallers

Haleon (HLN) 315.75p -1.57%
Endeavour Mining (EDV) 1,886.00p -1.51%
Rolls-Royce Holdings (RR.) 107.50p -1.48%
International Consolidated Airlines Group SA (CDI) (IAG) 167.40p -1.18%
Mondi (MNDI) 1,523.50p -1.10%
Fresnillo (FRES) 827.60p -1.05%
3i Group (III) 1,570.00p -1.04%
RS Group (RS1) 935.50p -1.01%
Berkeley Group Holdings (The) (BKG) 4,139.00p -1.00%
Scottish Mortgage Inv Trust (SMT) 745.40p -0.93%

FTSE 250 - Risers

Pets at Home Group (PETS) 354.20p 6.88%
Bridgepoint Group (Reg S) (BPT) 252.60p 3.95%
Barr (A.G.) (BAG) 545.00p 3.42%
Balanced Commercial Property Trust Limited (BCPT) 84.60p 2.30%
Dr. Martens (DOCS) 158.30p 2.19%
Clarkson (CKN) 3,090.00p 2.15%
Premier Foods (PFD) 115.00p 2.13%
Target Healthcare Reit Ltd (THRL) 83.90p 1.94%
TI Fluid Systems (TIFS) 119.40p 1.88%
Darktrace (DARK) 224.10p 1.86%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 444.80p -3.85%
Hochschild Mining (HOC) 76.50p -3.53%
Wizz Air Holdings (WIZZ) 2,653.00p -2.82%
Edinburgh Worldwide Inv Trust (EWI) 174.00p -2.68%
Carnival (CCL) 764.20p -2.50%
Trainline (TRN) 284.40p -1.90%
Shaftesbury (SHB) 384.20p -1.89%
Fidelity China Special Situations (FCSS) 288.50p -1.87%
Jupiter Fund Management (JUP) 142.80p -1.86%
Virgin Money UK (VMUK) 190.50p -1.80%