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London open: Stocks edge down amid inflation, recession woes
London stocks edged lower in early trade on Wednesday amid worries about inflation and a global slowdown, as investors eyed the Jackson Hole symposium.
At 0830 BST, the FTSE 100 was down 0.3% at 7,467.66.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Caution is the name of the game on equity markets with expectations that aggressive policies to tame roaring inflation will continue despite fresh signs that the US economy is slowing.
“The dramatic fall in the S&P Global composite PMI in August highlighted how demand was falling for the US services sector in particular as supply chain snarl ups, inflationary pressures and interest rate hikes took their toll. The ultimate impact of this drop in demand should be deflationary but it’s not clear how far and how fast these trends will feed through to lower headline prices.
“The data sparked a squally session on Wall Street as investors assessed the darker clouds gathering over the US economy, and signals from central bank policymakers that more rate hikes were ahead to try and ensure the inflation storm subsides. There are expectations that the chair of the Federal Reserve Jerome Powell will underline that message at annual central bank gathering at Jackson Hole, Wyoming on Friday. The FTSE 100 has retreated at the open amid a fresh round of risk off sentiment and worries about the prospects for global trade.”
Corporate news was thin on the ground as the summer lull finally kicked in.
Flexible workspace provider IWG was in the red as it announced the appointment of Charlie Steel as its news chief financial officer, succeeding Glyn Hughes. Steel joins IWG from Babylon Holdings, a digital health delivery and AI diagnosis business.
Top 10 FTSE 100 Risers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Admiral Group Plc | +1.53% | +34.00 | 2,259.00 |
| 2 |  |
Bae Systems Plc | +1.33% | +10.60 | 807.60 |
| 3 |  |
British American Tobacco Plc | +1.10% | +37.50 | 3,461.00 |
| 4 |  |
Spirax-sarco Engineering Plc | +0.80% | +85.00 | 10,675.00 |
| 5 |  |
Smith (ds) Plc | +0.78% | +2.10 | 273.00 |
| 6 |  |
Bunzl Plc | +0.75% | +23.00 | 3,076.00 |
| 7 |  |
Croda International Plc | +0.58% | +40.00 | 6,960.00 |
| 8 |  |
Unilever Plc | +0.56% | +22.00 | 3,963.50 |
| 9 |  |
Fresnillo Plc | +0.50% | +3.60 | 725.20 |
| 10 |  |
Smiths Group Plc | +0.40% | +6.00 | 1,515.00 |
Top 10 FTSE 100 Fallers
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Antofagasta Plc | -2.45% | -28.50 | 1,133.50 |
| 2 |  |
Tui Ag | -2.04% | -2.70 | 129.45 |
| 3 |  |
Sainsbury (j) Plc | -2.00% | -4.30 | 210.80 |
| 4 |  |
Anglo American Plc | -1.87% | -55.00 | 2,888.50 |
| 5 |  |
Prudential Plc | -1.87% | -17.80 | 936.00 |
| 6 |  |
Burberry Group Plc | -1.85% | -33.00 | 1,746.50 |
| 7 |  |
Rio Tinto Plc | -1.81% | -91.50 | 4,953.50 |
| 8 |  |
Persimmon Plc | -1.74% | -27.50 | 1,555.00 |
| 9 |  |
Marks And Spencer Group Plc | -1.63% | -2.10 | 126.90 |
| 10 |  |
Micro Focus International Plc | -1.45% | -3.90 | 264.90 |
US close: Stocks finish weaker after poor batch of data
Wall Street’s main market gauges closed in the red on Tuesday, after a batch of much weaker-than-expected economic data was released.
The Dow Jones Industrial Average was down 0.47% at 32,909.59, as the S&P 500 lost 0.22% to 4,128.73 and the Nasdaq Composite was off 0.002% at 12,381.30.
“While fear of economic collapse has been centred upon Europe, this afternoon has seen the US economy in the limelight as services activity crashed to the lowest level since May 2020,” said IG senior market analyst Joshua Mahony.
“Easing inflation data and improved retail sales numbers had provided a false sense of security for some but today’s PMI and new home sales data has served to highlight the struggles ahead for US businesses.”
On the economic front, S&P Global‘s preliminary business activity index for the US services sector slumped unexpectedly to a reading of 44.1 for August.
That was down from a reading of 47.3 in June and much weaker than economists’ forecasts for a rebound to 50.2.
A similar downside surprise one month before had contributed to much talk around imminent recession risks before being contradicted by the results of other more closely-followed surveys.
New home sales data for July meanwhile delivered another large negative surprise on Tuesday, revealing a drop in sales to below their level from before the pandemic.
According to the Commerce Department, the annualised pace of new home sales fell at a month-on-month pace of 12.6% in July to reach 511,000, compared to consensus forecasts for 580,000.
Investors were also digesting a decline in the Federal Reserve Bank of Richmond’s regional manufacturing sector survey from 0 in July to -8 for August.
In equities, Zoom Video Communications tumbled 16.54% after the video calling giant reported challenges around subscription growth and the strong dollar.
On the upside, department store chain Macy’s added 3.76% after better-than-expected second-quarter earnings, even as it lowered its full-year guidance amid high levels of inventory.
Wednesday newspaper round-up: Minimum wage, energy crisis, Eurostar
The minimum wage should be increased to £15 an hour as soon as possible to help millions of low-paid workers struggling amid the cost of living crisis, the TUC has said. In a move that opens a fresh policy gap between unions and Keir Starmer’s Labour party, the TUC has thrown its weight behind calls for a more ambitious legal floor on pay rates. The union body said the government needed to draw up plans to get wages rising as workers suffer the biggest hit to living standards on record. – Guardian
Ministers could face an additional £23bn price tag for covering extra household energy costs of £900 this autumn, rising to £90bn next year, a new paper by the Institute for Government has found. The paper, looking at the options for Liz Truss or Rishi Sunak in No 10, also warned the government should plan for prolonged rises in energy bills by going a lot further in making public appeals to use less gas – for example by informing consumers about the cost savings from turning down thermostats – and in committing to building more energy efficient homes to help protect consumers. – Guardian
Industry chiefs are preparing for the energy crisis to last for another three years as National Grid draws up emergency plans to reduce power demand from factories across Britain. Large industrial companies would be paid to cut gas usage every winter until 2025 as National Grid attempts to avoid uncontrolled blackouts that would cause “a major economic and societal impact”. – Telegraph
Eurostar trains will not stop in Kent for up to three years, the operator said as it blamed the decision on Brexit and its post-pandemic recovery. The county could remain disconnected from the Continent until 2025 after the train company dashed hopes of a gradual return of services next year. – Telegraph
The Dutch state railway, one of the biggest backers of Britain’s train network via its Abellio subsidiary, is quitting the UK. Abellio UK, which employs 15,000 people as operator of Greater Anglia, East Midlands Railway, West Midlands Railway and Merseyrail, and has substantial operations in the London bus market, is set to be sold by Nederlandse Spoorwegen to local management. – The Times
