London close: Stocks lower on data, debt ceiling discussions

(Sharecast News) - London's top share indices had dipped back into negative territory by the close of trading on Tuesday, driven by investor concerns over the looming deadline for raising the US federal debt ceiling. The FTSE 100 fell 0.1% to close at 7,762.95, while the FTSE 250 lost a more substantial 0.34% to finish the day at 19,208.31.

Investors were watching for developments from across the pond, after overnight discussions between US President Joe Biden and Republican House Speaker Kevin McCarthy were described as "productive", but failed to bring any significant breakthroughs.

In currency markets, sterling was last down 0.1% on the dollar to trade at $1.2425, while it weakened 0.25% against the euro to change hands at €1.1530.

"With the clock continuing to tick down towards the US debt ceiling deadline of 1 June, and US policymakers no nearer to a deal, European markets are finding little inclination to move higher," said CMC Markets chief market analyst Michael Hewson.

"The luxury sector is leading the weakness in Europe, the recent outperformance coming to a sudden end with big falls for the likes of LVMH, Hermes and Burberry all sharply lower, after Deutsche Bank cited elevated valuations in the sector."

Government borrowings blast past forecasts, grocery inflation slows

In economic news, the UK government's borrowing for April was reported at £25.6bn, up from £13.7bn in the same month last year.

That was considerably higher than the predicted figure of £19.1bn, and also exceeded the Office for Budget Responsibility's (OBR) forecast of £22.4bn.

According to the Office for National Statistics (ONS), the surge was down to the escalating costs of energy support schemes, rising benefit payments and increased debt interest payments.

For April alone, central government debt interest payable rose by £3.1bn year-on-year to £9.8bn, reaching the highest level since 1997.

Subsidies also saw a considerable increase, with the government spending £3.9bn in April, mainly due to the Energy Price Guarantee and the energy bills discount scheme.

Despite the trend, the ONS noted a silver lining as it revised down the estimated borrowing for the financial year ended March 2023 by £2.1bn, bringing it to £137.1bn.

Elsewhere, the cost of groceries remained elevated as food inflation fell slightly by 0.1 percentage points to 17.2% in the four weeks up to 14 May, according to retail consultancy Kantar.

Although marking a second consecutive month of reduction, it still stood as the third fastest rate recorded since 2008.

"The drop in grocery price inflation is without doubt welcome news for shoppers, but it is still incredibly high," said Fraser McKevitt, head of retail and consumer insight at Kantar.

"It could add an extra £833 to the average household's annual grocery bill if consumers don't shop in different ways."

The UK private sector meanwhile reported slowing growth in May, with the S&P Global/CIPS composite purchasing managers' index (PMI), measuring both manufacturing and service sectors, galling to 53.9 from 54.9 in April.

The service sector remained the central point of economic growth, but manufacturing firms reported the sharpest drop in production levels for four months.

"The UK is therefore seeing a tale of two economies, with the divergence between manufacturing and services posing difficulties for policymakers," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

"However, it's the far larger service sector that will typically dictate policy, meaning these survey results are nothing but hawkish in suggesting the Bank of England has more work to do to quash stubbornly high inflationary pressures in the services economy."

On the continent, eurozone business activity also reported slower growth in May, with the S&P Global flash composite PMI dipping to 53.3 from 54.1 in April.

That was marked by a slight decline in services and a continued slowdown in the manufacturing sector.

Across the pond, the US saw an increase in sales of newly built houses in May, with growth of 4.1% month-on-month to reach an annual rate of 683,000, surpassing economists' forecasts for 660,000.

However, the Department of Commerce revised the previous month's sales figure downwards to 656,000 from 680,000.

Cranswick jumps on full-year numbers, RS Group takes a tumble

On London's equity markets, commercial property giants British Land and Land Securities were among the standout gainers on the FTSE 100, advancing 2.61% and 0.76%, respectively.

Food service company SSP Group, the owner of Upper Crust, saw its shares rally 3.1% after it said its full-year sales and core profit projections were set to meet the upper range of its expectations.

That growth was primarily fuelled by a strong first half performance, particularly in North America.

The company previously predicted sales ranging between £2.9bn to £3bn, and EBITDA of £250m to £280m.

Elsewhere, shares in meat producer Cranswick climbed 5.41% after it reported a rise in full-year profit and revenue.

Telecoms giant BT Group also edged up 0.44% after Altice, a European communications multinational, increased its stake in the company to 24.5%.

However, Altice insisted it was not intending to make a takeover offer.

On the downside, RS Group, previously known as Electrocomponents, slid 6.99% after announcing full-year results.

The company pointed to a slowing in industrial growth in the first seven weeks of the 2024 fiscal year, as well as continued weakness and fierce competition in the electronics sector.

Water utility Pennon Group saw a 2.68% decline after Ofwat announced an enforcement investigation into the leakage performance data of South West Water, a Pennon subsidiary.

Aerospace and defence company Rolls-Royce Holdings suffered a 2.61% loss after it emerged that it was reportedly abandoning part of its carbon capture operation.

The retail sector also felt the pinch, with Frasers Group, JD Sports, Next, and B&M European Value Retail seeing a decline of 4.21%, 2.77%, 1.3% and 4.96% respectively on the back of the Kantar food price inflation data.

Reporting by Josh White for Sharecast.com.

FTSE 100 -8.04 (-0.1%) 7,762.95

RISERS Vodafone Group +2.98% 84.08p British Land Company +2.61% 365.7p British American Tobacco +2.24% 2,738.5p Kingfisher +2.15% 246.8p Barclays +2.1% 163.44p Imperial Brands +1.68% 1,819.5p Smurfit Kappa Group +1.54% 3,040p Mondi +1.4% 1,308p Lloyds Banking Group +1.38% 47.59p BP +1.38% 488.3p

FALLERS RS Group -6.99% B&M European Value Retail -4.96% 465.7p Frasers Group -4.21% 717p ConvaTec Group -3.24% 215p Burberry Group -3.13% 2,258p Halma -3.05% 2,380p JD Sports Fashion -2.77% 155.95p Rolls-Royce Holdings -2.61% 153.2p Antofagasta -2.59% 1,389.5p Flutter Entertainment -2.54% 16,300p

FTSE 250 -65.03 (-0.34%) 19,208.31

RISERS Cranswick +5.41% 3,310p Energean +4.55% 1,149p PureTech Health +3.55% 218.5p Great Portland Estates +3.35% 514.5p TUI +3.28% 548.2p SSP Group +3.1% 272.4p Marshalls +3.08% 314.4p Asos +2.55% 454.8p Harbour Energy +2.52% 243.9p Darktrace +2.36% 299.3p

FALLERS Dowlais Group -7.39% 132.9p Molten Ventures -6.54% 268.6p Digital 9 Infrastructure -4.41% 62.9p Future -4.3% 834p Diploma -3.29% 2,944p Games Workshop Group -3.03% 9,440p Computacenter -2.94% 2,380p JD Wetherspoon -2.83% 720p Vistry Group -2.83% 790p Pennon Group -2.68% 800p