London close: Stocks mixed as investors weigh UK, US data

(Sharecast News) - London markets closed with mixed results on Wednesday, as investors balanced positive news on the UK services sector against concerns over a potential US slowdown. The FTSE 100 rose 0.37% to close at 7,662.94, while the FTSE 250 dropped 1.14% to end the day at 18,601.42.

Sterling meanwhile showed mixed results against its major trading pairs, last falling 0.3% on the dollar to $1.2463, while it strengthened 0.07% against the euro to change hands at €1.1421.

"Sometimes markets go up on bad data, as it means rate cuts are coming, and sometimes they go down, since recession fears rise," said IG chief market analyst Chris Beauchamp.

"Today traders seem to have picked the latter option, with the warning from Mester about more rate hikes sounding in their ears too.

"Compared to the rebound in stocks since the lows of March it is still a drop in the ocean, but it shows investors are still skittish about the outlook for the year."

UK services sector still expanding, growth in US services weakens

On the economic front, the UK services sector continued to grow for the second consecutive month in March.

According to S&P Global/CIPS, the services purchasing managers' index (PMI) fell slightly from 53.5 in February to 52.9 in March, but remained above the 50-point level that separates expansion from contraction.

The survey showed a faster increase in new order volumes, reflecting greater confidence in both domestic and international markets, and the strongest rise in new export sales since September 2014.

"March data confirmed that the UK service sector returned to growth during the first quarter of 2023, supported by a sustained rebound in new orders as business and consumer confidence improved from the lows seen last autumn," said Tim Moore, economics director at S&P Global Market Intelligence.

"Export sales provided an additional boost to the service economy during March as the ongoing recovery in business travel and events helped to drive the fastest rise in new orders from abroad for at least eight-and-a-half years.

"Tight labour market conditions remained a constraint on business capacity across the service sector and fuelled another month of historically steep wage pressures."

Elsewhere, the UK car industry also showed positive signs of growth, with car registrations increasing by 18.2% on an annual basis in March, according to the Society of Motor Manufacturers and Traders (SMMT).

The eighth consecutive monthly increase was boosted by large fleet sales, up almost 50%, as supply chain challenges continue to ease.

"March's new plate month usually sets the tone for the year so this performance will give the industry and consumers greater confidence," said Mike Hawes, SMMT chief executive.

"With eight consecutive months of growth, the automotive industry is recovering, bucking wider trends and supporting economic growth.

"The best month ever for zero emission vehicles is reflective of increased consumer choice and improved availability but if EV market ambitions - and regulation - are to be met, infrastructure investment must catch up."

On the continent, economic recovery in the eurozone continued to gain momentum in March, with S&P Global's composite output index rising to a 10-month high of 53.7 from 52.0 in February.

While the latest figures were below the initial estimate of 54.1, they marked the third consecutive month above the 50.0 mark.

The eurozone services business activity index also came in at a 10-month high of 55.0 in March, the fastest rate of growth since May 2022.

In Germany, official data showed that factory orders surged by a surprising 4.8% in February, against economists' forecasts of a 0.3% increase.

The federal statistics agency reported an increase in new orders in the capital goods sector, intermediate goods orders, and consumer goods orders, indicating a rise in the manufacturing sector for the third consecutive month, 7.3% higher than in November 2022.

Across the pond, the Institute for Supply Management's services sector PMI fell sharply from 55.1 in February to 51.2 in March, below economists' forecasts of 54.5.

The sub-index for new orders saw a significant drop, falling from 62.6 to 52.2, while the sub-index for prices paid fell from 65.5 to 52.8.

"The bulk of the decline in the March headline is in the new orders index, down 10.4 points to 52.2, suggesting that future demand - or the expectation of future demand - already is being crushed by the banking crisis," said Kieran Clancy, senior US economist at Pantheon Macroeconomics.

"That's asking a lot, but the trend clearly is slowing.

"Softer wage growth, in turn, will help to bring down inflation in core services ex-housing, making it more likely that the Fed starts to cut rates later this year."

Private sector hiring in the US also slowed last month, according to a survey by consultancy ADP, with businesses adding 145,000 staff, down from 261,000 the previous month and economists' forecasts of 210,000.

Earlier in the global day, the Reserve Bank of New Zealand surprised markets with a bigger-than-expected rate hike, lifting its official cash rate by 50-basis points to 5.25%.

Analysts had been expecting a 25-basis point hike.

Utilities among the gainers as RS Group slides

On London's equity markets, utility plays were among the top performers with United Utilities Group, Centrica, National Grid, Severn Trent and SSE all seeing increases, ranging from 1.67% to 3.36%.

Caterer Compass Group rose 0.7% on the back of well-received results from France's Sodexo, which plans to spin off and list its benefits and rewards services business next year.

Vodafone Group saw a 2.25% rise after a report that its Spanish business is attracting takeover interest from potential buyers.

Despite not running a formal sale process for the unit, Bloomberg said Vodafone would consider offers at the right price.

Meanwhile, Direct Line Insurance Group experienced a surge of 6.69% after a double upgrade to 'buy' from 'sell' by Citi.

The share price decline of around 40% year-to-date and 32% reduction in 2023 consensus earnings per share estimates meant the risk is now skewed to the upside, the broker said.

Engineering firm John Wood Group saw strong gains of 7.2%, after it said late on Tuesday that it would "continue to engage with its shareholders" after private equity firm Apollo Global Management made a fifth and final takeover offer at £1.66bn.

On the downside, RS Group fell 6.26% after saying it expected annual adjusted operating profit to be only slightly ahead of estimates, despite a 1% rise in fourth-quarter like-for-like revenue, due to weak electronics sales.

Hilton Food Group was 5.04% weaker following a drop in full-year profit and the announcement of a new chief executive.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,662.94 0.37% FTSE 250 (MCX) 18,601.42 -1.14% techMARK (TASX) 4,524.09 0.33%

FTSE 100 - Risers

United Utilities Group (UU.) 1,076.50p 3.36% Haleon (HLN) 340.65p 2.92% GSK (GSK) 1,487.20p 2.64% Admiral Group (ADM) 2,132.00p 2.60% Severn Trent (SVT) 2,912.00p 2.39% National Grid (NG.) 1,129.00p 2.36% Vodafone Group (VOD) 89.45p 2.25% Endeavour Mining (EDV) 2,084.00p 1.76% SSE (SSE) 1,813.50p 1.68% Centrica (CNA) 109.40p 1.67%

FTSE 100 - Fallers

RS Group (RS1) 839.00p -6.26% CRH (CDI) (CRH) 3,800.00p -5.50% Kingfisher (KGF) 246.40p -4.12% Auto Trader Group (AUTO) 594.60p -4.03% Ashtead Group (AHT) 4,468.00p -3.50% Rightmove (RMV) 543.00p -3.42% Weir Group (WEIR) 1,782.00p -3.31% Spirax-Sarco Engineering (SPX) 11,400.00p -2.94% Taylor Wimpey (TW.) 113.45p -2.87% Persimmon (PSN) 1,204.00p -2.86%

FTSE 250 - Risers

Wood Group (John) (WG.) 214.40p 7.20% Direct Line Insurance Group (DLG) 153.05p 6.69% Digital 9 Infrastructure NPV (DGI9) 67.80p 3.99% Abrdn Private Equity Opportunities Trust (APEO) 436.00p 3.81% Centamin (DI) (CEY) 107.10p 2.68% Ithaca Energy (ITH) 154.40p 2.66% Pennon Group (PNN) 869.00p 1.99% Indivior (INDV) 1,431.00p 1.85% Hammerson (HMSO) 25.38p 1.76% HarbourVest Global Private Equity Limited A Shs (HVPE) 2,025.00p 1.49%

FTSE 250 - Fallers

Molten Ventures (GROW) 260.60p -5.85% Future (FUTR) 1,049.00p -5.32% Hilton Food Group (HFG) 660.00p -5.04% Liontrust Asset Management (LIO) 945.50p -4.97% Pagegroup (PAGE) 425.20p -4.96% AJ Bell (AJB) 332.00p -4.76% Auction Technology Group (ATG) 571.00p -4.67% Mitchells & Butlers (MAB) 157.60p -4.37% Currys (CURY) 55.70p -4.30% Discoverie Group (DSCV) 742.00p -4.26%