London close: Stocks still red amid renewed growth concerns

(Sharecast News) - London stocks remained below the waterline by the close on Wednesday, amid concerns about rising inflation and slowing economic growth. The FTSE 100 ended the session down 0.08% at 7,593.00, and the FTSE 250 was off 0.43% at 20,310.99.

Sterling was also in negative territory, last trading down 0.29% on the dollar at $1.2555, and losing 0.6% against the euro to change hands at €1.1691.

"Traders are nervous ahead of tomorrow's European Central Bank meeting as there is chatter the bank will use the meeting as an opportunity to confirm that rates will be hiked in July," said Equiti Capital market analyst David Madden.

"It is no secret the ECB are keen to tighten monetary policy and in turn try and curtail rising prices, after all CPI in the eurozone is at a record high of 8.1%.

"In London, the mood is a little bearish as banking, mining and travel stocks are in the red, but strong gains in oil companies is why the FTSE 100 has not lost as much ground as the indices in mainland Europe."

Madden noted that volatility in US stocks was lower than in Europe "for a change", adding that the 10-year US Treasury yield was hovering around 3%, playing on traders' minds.

"Worries about rising yields comes at a time when the OECD downgraded its global growth forecast for 2022 from 4.5% in December to 3%."

Indeed in economic headlines, the UK is set to experience the slowest growth in the developed world next year, according to the Organisation for Economic Co-operation and Development (OECD).

In its latest economic outlook, the OECD said it expects the UK economy to grow 3.6% this year, with no growth forecast for next year.

That means it would go from being the second-fastest growing economy in the G7 to the slowest in 2023.

Previously, the Paris-based think tank had forecast growth of 4.7% for this year and 2.1% for next year.

However, it said on Wednesday that it expects the UK to suffer more than any other major industrial country from the impact of the Ukraine conflict.

It also said the UK government should consider slowing fiscal consolidation to support growth.

"The UK economy is susceptible to economic spillover effects from Russia's invasion into Ukraine through rising energy prices and supply chain disruptions," the OECD said.

"Private consumption will slow as rising prices erode households' incomes; household savings will decline to below pre-pandemic levels, with some households taking on more debt to keep up with the rising cost of living.

"Inflation will continue to rise, peaking at just over 10% in the fourth quarter of 2022, driven by increasing global prices of tradable goods and services due to supply bottlenecks, transportation costs and energy prices."

Elsewhere, growth in the UK construction sector slowed in May as deteriorating consumer confidence and rising inflation led to the weakest rise in residential work for two years, according to a survey released earlier.

The S&P Global/CIPS construction purchasing managers index fell to 56.4 from 58.2 in April, hitting its lowest level in four months.

That decline was put down to weaker trends in housebuilding, with the index for the sub-sector down to 50.7 in May from 53.8 a month earlier, marking the worst performance for residential work since May 2020.

Survey respondents suggested that subdued consumer confidence and worries about the economic outlook had weighed on demand.

"Subdued client confidence affected new order levels with the slowest rise in pipelines of new work since December 2021," said Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

"The housing sector in particular showed further signs of fragility with the worst performance since May 2020 and moving closer to the danger zone of negative territory.

"Affordability concerns will be weighing on the mind of potential house buyers grappling with escalating costs for everyday items, resulting in a postponement of big purchases until the UK economy shows more resilience."

Still on data, UK house prices slowed again in May as the market showed signs of cooling as soaring inflation starts to hit buyers, mortgage lender Halifax said.

The annual pace of house price increases slowed to 10.5% in May from 10.8% in April, as prices rose for the 11th consecutive month, up by 1.0% in May after a 1.2% increase in April.

Housing shortages remained the key driver for prices, said Russell Galley, managing director at Halifax.

"However, the housing market has begun to show signs of cooling. Mortgage activity has started to come down and, coupled with the inflationary pressures currently exerted on household budgets, it's likely activity will start to slow," he said.

"So, there is perhaps one green shoot for prospective purchasers; with overall buying demand down compared to last year, we may be past the peak sellers' market."

Across the channel, eurozone GDP grew faster than initially estimated in the first quarter, while employment growth for April was also revised up, according to figures released by Eurostat.

GDP rose by 0.6% on the quarter in the eurozone, following 0.2% growth in the final quarter of 2021 - this was up from an earlier estimate of 0.3% growth.

On the year, GDP was up 5.4% following a 4.7% increase in the previous quarter.

Finally, German industrial production rose less than expected in April, according to figures released by Destatis.

Production increased by 0.7 following a 3.7% decline in March, coming in below expectations for a 1% rise.

Year-on-year, industrial production was 2.2% lower in April following a 3.1% decline a month earlier.

On London's equity markets, defence technology firm Chemring Group slid 4.64% after the release of its interim results.

Low-cost airline Wizz Air descended 9.46% after saying it expected to make a first-quarter loss despite strong summer demand, as it deployed extra resources to minimise disruption due to staff shortages and supply chain issues.

Shares in rival easyJet were 1.95% lower in reaction to the news along with travel outlet food operator and Upper Crust owner SSP Group - heavily dependent on passenger traffic at airports - which lost 2.75%.

National Express Group continued its slide, falling 8.08% after the coach operator warned on Tuesday that profits were recovering far slower than expected.

The slump came after National Express said it expected "the recovery in profitability to lag our revenue recovery" over the next five years.

Flexible office space provider Workspace Group reversed earlier gains to close down 3.74%, even after saying it swung to a full-year pre-tax profit, with customer demand now running at pre-Covid levels.

Going the other way, Melrose Industries rocketed 10.98% after the GKN owner announced the launch of a £500m share buyback following the agreed sale of its Ergotron business earlier in the week.

Information technology consultancy Aveva was up 10.67% despite saying it swung to a full-year loss.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk and Frank Prenesti.

Market Movers

FTSE 100 (UKX) 7,593.00 -0.08% FTSE 250 (MCX) 20,310.99 -0.43% techMARK (TASX) 4,398.89 0.32%

FTSE 100 - Risers

Melrose Industries (MRO) 157.70p 10.98% Aveva Group (AVV) 2,468.00p 10.67% Scottish Mortgage Inv Trust (SMT) 815.80p 5.05% Ocado Group (OCDO) 952.60p 3.45% JD Sports Fashion (JD.) 122.25p 3.21% Avast (AVST) 483.00p 1.90% GSK (GSK) 1,751.00p 1.83% Whitbread (WTB) 2,750.00p 1.81% Harbour Energy (HBR) 386.90p 1.66% Prudential (PRU) 1,058.00p 1.54%

FTSE 100 - Fallers

Airtel Africa (AAF) 144.00p -8.05% Royal Mail (RMG) 291.40p -5.17% Schroders (SDR) 2,818.00p -3.23% Abrdn (ABDN) 186.50p -2.48% Rentokil Initial (RTO) 496.50p -2.26% Croda International (CRDA) 6,636.00p -2.07% SEGRO (SGRO) 1,068.50p -2.02% Smurfit Kappa Group (CDI) (SKG) 3,148.00p -1.99% St James's Place (STJ) 1,206.00p -1.99% HSBC Holdings (HSBA) 518.80p -1.98%

FTSE 250 - Risers

Capricorn Energy (CNE) 229.80p 7.69% Tullow Oil (TLW) 56.40p 5.03% PureTech Health (PRTC) 182.00p 4.84% Mediclinic International (MDC) 426.40p 3.80% Baillie Gifford US Growth Trust (USA) 166.00p 3.62% Edinburgh Worldwide Inv Trust (EWI) 184.60p 3.13% Darktrace (DARK) 375.00p 3.11% Petershill Partners (PHLL) 241.00p 2.99% Johnson Matthey (JMAT) 2,126.00p 2.46% Oxford Biomedica (OXB) 514.00p 2.39%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 2,499.00p -9.46% National Express Group (NEX) 225.80p -7.84% Chemring Group (CHG) 349.00p -4.64% Pantheon International (PIN) 265.50p -4.50% Indivior (INDV) 316.40p -3.83% Workspace Group (WKP) 695.00p -3.74% Synthomer (SYNT) 295.00p -3.41% Bodycote (BOY) 648.50p -3.14% Ashmore Group (ASHM) 229.80p -3.04% Carnival (CCL) 963.00p -2.83%