London close: Stocks end down as GSK tumbles on litigation woes

The FTSE 100 closed 0.2% lower at 8,262.75, with all eyes on an expected rate cut by the European Central Bank this week.

Chris Beauchamp, chief market analyst at IG, said: "The morning session for Europe and US futures suggested we might see more gains, but aside from small gains for the Nasdaq 100 Wall Street has failed to make progress, while European markets have given back some of their gains.

"A contraction in US manufacturing activity and signs of strength in European gas prices have given investors reason to put their bullishness on hold."

On the UK macro front, a survey out earlier showed the manufacturing sector returned to growth in May, with output growing at the fastest pace in more than two years.

The S&P Global manufacturing purchasing managers’ index rose to 51.2 from 49.1 in April, coming in above the 50.0 mark that separates contraction from expansion. This marked the highest reading since July 2022 but was just a touch lower than the flash estimate of 51.3.

The survey also showed that business optimism hit its highest level in 27 months, with 63% of companies expecting output to expand over the coming year.

Rob Dobson, director at S&P Global Market Intelligence, said: "May saw a solid revival of activity in the UK manufacturing sector, with levels of production and new business both rising at the quickest rates since early-2022. The breadth of the recovery was also a positive, with concurrent output and new order growth registered for all of the main subindustries (consumer, intermediate and investment goods) and all company size categories for the first time in over two years.

"The latest PMI survey data provided a mixed picture for price pressures at manufacturers, however. At the factory gate, output charge inflation strengthened for the fifth successive month and to its highest level in a year. That said, a solid easing in the rate of increase in input costs should help prevent price pressures from becoming embedded."

In corporate news, GSK tumbled after a US court ruled that jury trials could hear expert witnesses in cases brought by cancer sufferers claiming its Zantac heartburn drug caused their condition.

A judge in the Delaware State Court ruled that scientific experts would be able to testify there is a link between the plaintiffs' illnesses and their exposure to probable human carcinogens, through the Zantac drug.

Russ Mould, investment director at AJ Bell, said: "Investors had reached a point of some comfort with GSK’s Zantac issue as a series of US lawsuits linking the heartburn drug to cancer appeared to be running out of steam.

"However, a judge in Delaware has thrown a significant spanner into the works by giving the green light for 70,000 cases to go forward and by allowing expert witnesses to testify in court that the drug may cause cancer.

"GSK and the other parties involved, Pfizer and Sanofi, have made clear they disagree with the ruling and GSK has said it will mount an appeal.

"However, in the short term this just pours more uncertainty over the investment case. An uncomfortable comparison for GSK management can be drawn with AstraZeneca, which has left its counterpart for dust in recent times and is forging ahead with ambitious growth targets."

Baltic Classifieds fell after Antler, which is controlled by funds advised by Apax, sold 40m shares in a placing.

On the upside, JD Sports surged, having slumped on Friday after full-year results.

St James’s Place rallied after an upgrade to ‘overweight’ from ‘neutral’ at , which cited an attractive valuation and reducing uncertainty. "Whilst we believe that negative news is largely behind us, this has not been reflected in valuation, with St James’s Place trading at 7x FY25e," it said.

"We expect that sentiment will improve given the resilience in gross flows, and we see upside to consensus net flow estimates."

Quilter was also up as JPM lifted the shares to ‘overweight’ from ‘neutral’, saying it was "looking beyond the redress".

National Grid got a boost as Citi upped the shares to ‘buy’ from ‘neutral’ and lifted the price target to 985p from 920p, citing an attractive risk/reward.

Pets At Home was lifted by an upgrade to ‘buy’ from ‘hold’ at Liberum, which increased its price target to 360p from 290p.

Hipgnosis edged up after it agreed the terms of an improved cash offer from US private equity firm Blackstone, at $1.31 a share, up from $1.30.

Market Movers

FTSE 100 (UKX) 8,262.75 -0.15%
FTSE 250 (MCX) 20,900.49 0.82%
techMARK (TASX) 4,836.84 -0.17%

FTSE 100 - Risers

JD Sports Fashion (JD.) 133.95p 5.06%
St James's Place (STJ) 523.00p 4.68%
Entain (ENT) 705.40p 4.47%
easyJet (EZJ) 475.40p 3.35%
Land Securities Group (LAND) 670.00p 2.68%
Ocado Group (OCDO) 382.70p 2.44%
International Consolidated Airlines Group SA (CDI) (IAG) 175.40p 2.33%
3i Group (III) 2,926.00p 2.20%
Rightmove (RMV) 544.60p 2.14%
Airtel Africa (AAF) 124.50p 2.13%

FTSE 100 - Fallers

GSK (GSK) 1,598.00p -9.54%
Ashtead Group (AHT) 5,516.00p -3.02%
Pearson (PSON) 932.80p -1.60%
BP (BP.) 481.20p -1.42%
Severn Trent (SVT) 2,357.00p -1.22%
Compass Group (CPG) 2,168.00p -1.09%
Intermediate Capital Group (ICG) 2,286.00p -1.04%
Shell (SHEL) 2,782.50p -1.03%
United Utilities Group (UU.) 1,006.00p -0.98%
Beazley (BEZ) 683.50p -0.94%

FTSE 250 - Risers

Tritax Eurobox (GBP) (EBOX) 59.90p 11.34%
Ferrexpo (FXPO) 45.95p 10.59%
Pets at Home Group (PETS) 322.60p 8.91%
TUI AG Reg Shs (DI) (TUI) 575.50p 6.97%
Wizz Air Holdings (WIZZ) 2,414.00p 5.32%
Auction Technology Group (ATG) 549.00p 5.17%
Quilter (QLT) 123.40p 4.75%
Elementis (ELM) 156.40p 4.13%
Essentra (ESNT) 171.20p 3.76%
Helios Towers (HTWS) 129.40p 3.69%

FTSE 250 - Fallers

Baltic Classifieds Group (BCG) 242.50p -5.46%
Harbour Energy (HBR) 322.30p -2.33%
Oxford Instruments (OXIG) 2,450.00p -2.00%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,345.00p -1.88%
Energean (ENOG) 1,171.00p -1.84%
Pennon Group (PNN) 611.00p -1.77%
Barr (A.G.) (BAG) 613.00p -1.61%
Me Group International (MEGP) 180.00p -1.53%
CMC Markets (CMCX) 277.50p -1.42%
Keller Group (KLR) 1,272.00p -1.40%