London open: Stocks slump amid recession fears; household incomes fall again

At 0840 BST, the FTSE 100 was down 1.9% at 7,176.29.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "A sense of foreboding is again gripping financial markets, with anxiety rising that by attacking inflation, central banks risk severely weakening economies.

"Following fresh falls on Wall Street, Asian markets retreated and European indices also opened lower."

Figures released earlier by the Office for National Statistics showed the economy grew 0.8% in the first quarter, in line with the initial estimate, and down from 1.3% growth in the fourth quarter of 2021.

On an annual basis, GDP growth for the first quarter was confirmed at 8.7%, up from 6.6% in the final quarter of last year.

ONS director of Economic Statistics, Darren Morgan, said: "Our latest estimate for economic growth in the first quarter is unrevised as a whole, showing the UK economy continued to recover from the pandemic."

ONS data also showed that household incomes fell for the fourth quarter in a row in the first quarter of the year - the longest run of declines since 1955. Adjusted for inflation, disposable incomes fell 0.2%, leaving incomes down 1.3% on the year even before the increase in energy bills and National Insurance in April.

Capital Economics said: "The final Q1 GDP data leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3.

"Although GDP and consumer spending won’t fall as far as real incomes, it’s pretty clear that the economy is going to be very weak for a while. A recession is a real risk."

The latest survey from Nationwide was also in focus. It showed the pace of growth in house prices slowed in June from the previous month, with "tentative" signs of a slowdown in the market.

House prices in June were 0.3% higher than in May, when they rose 0.9%, and were up 10.7% year-on-year, a slowdown from May’s annual growth of 11.2%. Economists had forecast monthly and annual price rises of 0.5% and 10.8% respectively.

Investors were also digesting data out of China, which showed that activity in the manufacturing and services sectors rebounded in June as Covid restrictions were eased in Shanghai.

The official manufacturing purchasing managers’ index rose to 50.2 in June from 49.6 in May, coming in just below consensus expectations for a reading of 50.5 and marking its strongest level since February. Meanwhile, the non-manufacturing PMI ticked up to 54.7 in June from 47.8 the month before, versus consensus expectations of 50.5.

In equity markets, housebuilders were under the cosh after the release of the Nationwide survey, with Persimmon and Barratt among the worst performers on the FTSE 100.

Distribution and services group Bunzl rallied after it said first-half operating margin was expected to be slightly higher than historic levels as inflation and acquisitions drove underlying growth. Group revenue in the first half is expected to increase year-on-year by approximately 16% at actual exchange rates and by 12-13% on a constant currency basis, the company said.

Virgin Money also gained as it launched a £75m share buyback programme. It was also boosted by an upgrade to ‘overweight’ at Barclays.

Market Movers

FTSE 100 (UKX) 7,176.29 -1.86%
FTSE 250 (MCX) 18,694.28 -1.81%
techMARK (TASX) 4,266.17 -1.22%

FTSE 100 - Risers

Bunzl (BNZL) 2,707.00p 1.35%
Pershing Square Holdings Ltd NPV (PSH) 2,555.00p 0.00%
Meggitt (MGGT) 789.60p -0.05%
Centrica (CNA) 81.84p -0.20%
Vodafone Group (VOD) 126.24p -0.21%
BAE Systems (BA.) 824.60p -0.29%
Avast (AVST) 522.80p -0.31%
DCC (CDI) (DCC) 5,124.00p -0.39%
WPP (WPP) 815.60p -0.54%
Spirax-Sarco Engineering (SPX) 9,656.00p -0.64%

FTSE 100 - Fallers

B&M European Value Retail S.A. (DI) (BME) 366.60p -5.12%
Persimmon (PSN) 1,829.00p -4.49%
Barratt Developments (BDEV) 456.40p -4.12%
Burberry Group (BRBY) 1,626.50p -4.04%
Mondi (MNDI) 1,459.50p -3.54%
Smurfit Kappa Group (CDI) (SKG) 2,758.00p -3.50%
Melrose Industries (MRO) 148.30p -3.39%
Smith (DS) (SMDS) 282.60p -3.35%
Intertek Group (ITRK) 4,207.00p -3.29%
Intermediate Capital Group (ICP) 1,302.50p -3.20%

FTSE 250 - Risers

Virgin Money UK (VMUK) 132.35p 3.20%
Jlen Environmental Assets Group Limited NPV (JLEN) 122.00p 2.01%
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 303.50p 0.17%
Euromoney Institutional Investor (ERM) 1,368.00p 0.15%
QinetiQ Group (QQ.) 365.20p 0.11%
Rathbones Group (RAT) 1,964.00p 0.00%
SDCL Energy Efficiency Income Trust (SEIT) 117.80p 0.00%
JPMorgan European Discovery Trust (JEDT) 382.00p 0.00%
Polymetal International (POLY) 190.00p 0.00%
The Global Smaller Companies Trust (GSCT) 141.40p 0.00%

FTSE 250 - Fallers

Liontrust Asset Management (LIO) 920.00p -7.82%
Aston Martin Lagonda Global Holdings (AML) 448.00p -6.71%
Bank of Georgia Group (BGEO) 1,316.00p -6.27%
Chrysalis Investments Limited NPV (CHRY) 106.60p -5.33%
Abrdn Private Equity Opportunities Trust (APEO) 447.00p -4.69%
Urban Logistics Reit (SHED) 163.00p -4.68%
Wizz Air Holdings (WIZZ) 1,772.00p -4.58%
easyJet (EZJ) 370.30p -4.22%
ASOS (ASC) 819.00p -4.15%
Blackrock Throgmorton Trust (THRG) 541.00p -4.08%