London close: Stocks fall despite better-than-expected economic data

(Sharecast News) - London stocks closed below the waterline on Tuesday, as investors sifted through a raft of UK data and results from the likes of HSBC and InterContinental Hotels. The FTSE 100 ended the session down 0.46% at 7,977.75, and the FTSE 250 was off 1.23% at 19,850.85.

Sterling was meanwhile in the green, last rising 0.61% on the dollar to $1.2114, and strengthening 0.83% against the euro to change hands at €1.1363.

"European markets have slipped back today, with the FTSE 100 slipping below the 8,000 level despite some broadly better-than-expected flash PMI numbers, which showed that economic activity broadly improved in February," said CMC Markets chief market analyst Michael Hewson.

"While a positive development, this has served to help push yields higher in anticipation that central banks might have to be slightly more hawkish when it comes to raising rates in the coming weeks."

In economic news, the UK government unexpectedly recorded a budget surplus in January as self-assessment income tax receipts surged, according to the Office for National Statistics.

The Treasury recorded a surplus of £5.4bn borrowing, versus consensus expectations for a £7.8bn deficit - this was down £7.1bn compared to January 2022.

Previously, the Office for Budget Responsibility was expecting a £0.4bn surplus.

Self-assessment income tax receipts hit a record of £21.9bn - the highest January figure since monthly records began in April 1999 and up £5.5bn on January 2022.

The figures also showed that interest on government debt reached £6.7bn in January, the highest amount for the month since records began in 1997.

"January's public finances figures suggest the Chancellor may have scope for some giveaways in his Budget on 15 March," said Ruth Gregory, deputy chief UK economist at Capital Economics.

"But with the OBR poised to slash its medium-term economic growth forecasts, any hopes the Chancellor might be able to give away a significant amount of money, while sticking to his previous debt-reduction plans, may be disappointed."

Elsewhere, manufacturing output fell in February at the fastest pace since September 2020, according to a survey from the Confederation of British Industry.

The CBI's gauge of factory output for the three months to February fell to -16 from -1 the month before.

Meanwhile, the balance of total news order ticked up to -16 from -17, but remained very much in negative territory.

"Conditions in manufacturing remain challenging, with output disappointing and order books having thinned out since late last year," said CBI deputy chief economist Anna Leach.

"However, if growth is going to return to the sector on a sustainable basis, then manufacturers need more than the boost some will receive from lower energy prices over the winter season."

Finally on UK data, the private sector returned to growth in February, with the S&P Global/CIPS flash PMI composite output index rising to 53.0 from 48.5 in January.

That made for an eight-month high, and was above the 50-point mark that separates contraction from expansion for the first time since July 2022.

Economists had forecast a reading of 49.0.

The flash services PMI business activity index came in at 53.3 in February, up from 48.7 the month before and also an eight-month high.

Economists had been expecting a reading of 49.2.

Meanwhile, the manufacturing PMI pushed up to 49.2 from 47.0, hitting a seven-month high and above expectations of 47.5.

Survey respondents cited rising customer demand and improving business confidence in February, due to lower economic uncertainty, fewer supply shortages and falling inflation.

"Much better than anticipated PMI data for February indicate encouraging resilience of the economy in the face of headwinds which include rising interest rates, the ongoing cost of living crisis, labour shortages and strikes," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

"While many companies continue to report tough operating conditions, especially in the manufacturing sector, the broader business mood has been buoyed by signs of inflation peaking, supply chains improving and recession risks easing.

"The stress created by last autumn's mini budget is also continuing to work its way out of the financial system."

On the continent, business growth in the eurozone hit a nine-month high in February, according to a preliminary reading released on Tuesday.

The S&P Global flash eurozone PMI composite output index increased to 52.3 from 50.3 in January, rising for the fourth month in a row and indicating the strongest expansion since last May.

Economists had been expecting a reading of 50.6.

Consumer confidence in the single currency block meanwhile improved for the fifth month in a row in February, but remained well below its long-term average.

The European Commission's consumer confidence index for the euro area rose by 1.9 points from the month before to -19.0, in line with economists' expectations.

A separate index for the whole of the European Union meanwhile improved by 1.5 points to -20.6.

Finally on the economic front, home selling activity in the US slowed for the 12th straight month at the start of the year.

According to the National Association of Realtors, existing-home sales fell by a seasonally-adjusted 0.7% month-on-month during January to reach an annual rate of four million, below consensus expectations for 4.1 million.

In comparison to a year ago, existing-home sales were down by 36.9%, while prices were up 1.3% at $359,000.

On London's equity markets, InterContinental Hotels Group slipped 0.97% despite reporting a jump in annual profits and announcing a $750m share buyback as travel continued to rebound from the Covid pandemic.

Chilean miner Antofagasta was 2.21% weaker after it posted a drop in full-year profits and revenue as operating costs rose and prices fell.

Wizz Air flew 4.93% lower after a double-downgrade to 'underweight' at Barclays, while Moneysupermarket Group was hit 3.76% by a downgrade to 'add' at Numis.

On the upside, Smith & Nephew was ahead 4.22% even after it posted a slump in operating profits.

HSBC reversed earlier losses to close up 4.32%, after it unveiled a special dividend and said quarterly profits almost doubled, driven by the rise in global interest rates, but struck a cautious note on the outlook.

Currys gained 5.41% after an upgrade on the electricals and appliances retailer to 'reduce' at Numis, while Petershill Partners was up 1.96% after an initiation at 'buy' at Jefferies.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,977.75 -0.46% FTSE 250 (MCX) 19,850.85 -1.23% techMARK (TASX) 4,640.73 -0.12%

FTSE 100 - Risers

HSBC Holdings (HSBA) 647.50p 4.32% Smith & Nephew (SN.) 1,210.50p 4.22% BAE Systems (BA.) 906.80p 1.96% Burberry Group (BRBY) 2,592.00p 1.81% Frasers Group (FRAS) 804.00p 1.26% Associated British Foods (ABF) 1,969.00p 1.21% Coca-Cola HBC AG (CDI) (CCH) 2,108.00p 1.20% Compass Group (CPG) 1,924.50p 0.81% JD Sports Fashion (JD.) 180.75p 0.70% Unilever (ULVR) 4,238.50p 0.67%

FTSE 100 - Fallers

Anglo American (AAL) 3,154.00p -5.50% Persimmon (PSN) 1,415.00p -3.54% Glencore (GLEN) 503.30p -3.16% Prudential (PRU) 1,256.50p -3.12% Rightmove (RMV) 559.40p -2.98% Kingfisher (KGF) 272.00p -2.93% Johnson Matthey (JMAT) 2,163.00p -2.83% Barratt Developments (BDEV) 453.70p -2.79% SEGRO (SGRO) 828.00p -2.68% Abrdn (ABDN) 209.30p -2.65%

FTSE 250 - Risers

Currys (CURY) 78.95p 5.41% BH Macro Ltd. GBP Shares (BHMG) 459.00p 3.15% Abrdn Private Equity Opportunities Trust (APEO) 455.00p 2.21% Spire Healthcare Group (SPI) 245.00p 2.08% Petershill Partners (PHLL) 166.80p 1.96% Morgan Advanced Materials (MGAM) 311.00p 1.30% Marks & Spencer Group (MKS) 152.55p 1.23% QinetiQ Group (QQ.) 350.20p 1.21% SSP Group (SSPG) 263.50p 1.04% Ibstock (IBST) 164.20p 0.98%

FTSE 250 - Fallers

Molten Ventures (GROW) 378.40p -5.87% Harbour Energy (HBR) 278.20p -5.53% Wizz Air Holdings (WIZZ) 2,545.00p -4.93% Jupiter Fund Management (JUP) 136.70p -4.81% AJ Bell (AJB) 323.40p -3.98% Kainos Group (KNOS) 1,420.00p -3.95% Moonpig Group (MOON) 109.70p -3.94% Moneysupermarket.com Group (MONY) 225.20p -3.76% IWG (IWG) 182.45p -3.54% Digital 9 Infrastructure NPV (DGI9) 79.00p -3.54%