London midday: Stocks sharply lower amid global selloff; Wood Group tanks
London stocks were still sharply in the red by midday on Monday amid a global market selloff, and after Japan’s Nikkei tanked more than 12%, suffering its worst session since Black Monday in 1987.
The FTSE 100 was down 2.3% at 7,990.95, falling the most in more than year amid speculation of a potential emergency rate cut by the US Federal Reserve.
Sentiment took a knock on Friday after the non-farm payrolls report for July came in much weaker than expected, fuelling concerns the Fed may have made a mistake by not cutting rates last week.
Richard Hunter, head of markets at Interactive Investor, said: "The non-farm payrolls report showed that just 114,000 jobs had been added in July, against estimates of 185,000 and sharply lower than the 179,000 figure for June, which itself was revised down from an initial print of 206,000. At the same time the unemployment rate, which had been expected to remain stable at 4.1%, increased to 4.3%. The reading followed weak jobless claims and manufacturing data from the previous day which had taken investors by surprise.
"The main concern now is whether the Federal Reserve’s reluctance to reduce interest rates thus far is now translating into a policy error which will see the economy glide into recession. At the same time, speculation is now rife that a 0.5% rate cut is now firmly on the cards, with the vague possibility that it could come by way of an emergency announcement prior to the September meeting."
On home shores, a survey out earlier showed that growth in the services sector accelerated in July, with the strongest upturn in demand since May 2023.
The S&P Global services PMI business activity index edged up to 52.5 from 52.1 in June, coming in a touch higher than the flash estimate of 52.4 and marking the first time since April that growth has accelerated.
A reading above 50 indicates expansion, while a reading below signals contraction.
Joe Hayes, principal economist at S&P Global Market Intelligence, said: "With the general election period coming to an end at the start of July, survey data for last month showed the UK service sector enjoyed a modest rebound after a fairly subdued end to Q2. The business activity index crept up only slightly, but the new business index jumped by over three points to its highest level in 14 months as firms reported an influx of new clients and contracts.
"July's accelerated expansion in sales activity crucially suggests business and consumer confidence has improved, and albeit only one month into the second half of 2024, the latest survey results bode well for a reasonable GDP growth print in Q3.
"Still, there continues to be sluggish progress on inflation. The positive takeaway is that price pressures, both regarding input costs and output prices, are at their lowest since early 2021. The concern, however, will be that the respective PMIs are still well above their pre-pandemic trends, and these are the benchmarks for the Bank of England to hit before claiming the fight against inflation is over."
In equity markets, Wood Group tanked after Dubai-based engineering and consultancy firm Sidara said it won’t be making a firm takeover offer for the company due to "geopolitical risks and financial market uncertainty".
Wood Group said at the end of May that it was evaluating a fourth and final "unsolicited, preliminary and conditional" takeover proposal from Sidara at 230p a share.
Sidara originally had until 5 June to either announce a firm intention to make an offer or walk away, but this ‘put up or shut up’ deadline was pushed back to 9 August.
Shipping services firm Clarksons was also under the cosh as it reiterated its expectations for the full year but posted a drop in interim profit and revenue.
Scottish Mortgage and Pershing Square, which are particularly exposed to the US, were both weaker.
Lloyds was knocked lower by a downgrade to 'neutral' at Citi.
On the upside, defensive stocks managed some gains, with Reckitt, Haleon, Unilever, Diageo and GSK all higher.
Market Movers
FTSE 100 (UKX) 7,990.95 -2.25%
FTSE 250 (MCX) 20,171.53 -3.14%
techMARK (TASX) 4,683.49 -2.10%
FTSE 100 - Risers
Reckitt Benckiser Group (RKT) 4,206.00p 1.35%
Haleon (HLN) 370.80p 0.82%
Diageo (DGE) 2,383.50p 0.15%
B&M European Value Retail S.A. (DI) (BME) 454.90p 0.11%
Darktrace (DARK) 594.00p 0.03%
RELX FINANCE BV 3.375% GTD NTS 20/03/33 (BW73) 99.72p 0.00%
BAE Systems (BA.) 1,280.50p -0.12%
Unilever (ULVR) 4,834.00p -0.25%
GSK (GSK) 1,558.50p -0.26%
InterContinental Hotels Group (IHG) 7,330.00p -0.49%
FTSE 100 - Fallers
Melrose Industries (MRO) 449.30p -6.90%
Scottish Mortgage Inv Trust (SMT) 757.80p -6.81%
Pershing Square Holdings Ltd NPV (PSH) 3,344.00p -6.80%
JD Sports Fashion (JD.) 116.45p -5.90%
Fresnillo (FRES) 541.50p -5.50%
Rolls-Royce Holdings (RR.) 439.50p -5.26%
Intermediate Capital Group (ICG) 1,879.00p -5.10%
Glencore (GLEN) 384.55p -5.06%
Severn Trent (SVT) 2,524.00p -4.86%
Entain (ENT) 513.60p -4.82%
FTSE 250 - Risers
Ruffer Investment Company Ltd Red PTG Pref Shares (RICA) 283.50p 2.35%
Wizz Air Holdings (WIZZ) 1,463.00p 1.04%
Jlen Environmental Assets Group Limited NPV (JLEN) 95.00p 0.64%
W.A.G Payment Solutions (WPS) 64.00p 0.63%
Patria Private Equity Trust (PPET) 540.00p 0.56%
Foresight Solar Fund Limited (FSFL) 86.80p 0.00%
Tami Senior Securitisation 2 Ltd Cls A-2 Mb Fxd Rte Nts 31/12/23 (Reg S) (BP00) 0.00p 0.00%
Virgin Money UK (VMUK) 214.60p -0.19%
Network International Holdings (NETW) 390.60p -0.20%
Britvic (BVIC) 1,264.00p -0.32%
FTSE 250 - Fallers
Wood Group (John) (WG.) 123.10p -37.51%
Clarkson (CKN) 3,960.00p -9.38%
Allianz Technology Trust (ATT) 320.00p -8.05%
Aston Martin Lagonda Global Holdings (AML) 134.70p -7.68%
JPMorgan Japanese Inv Trust (JFJ) 481.00p -6.96%
Senior (SNR) 147.20p -6.60%
Trustpilot Group (TRST) 184.40p -6.59%
Polar Capital Technology Trust (PCT) 2,730.00p -6.51%
TI Fluid Systems (TIFS) 112.20p -6.50%
CMC Markets (CMCX) 287.00p -6.36%