London midday: Stocks in the red as inflation, recession fears weigh

(Sharecast News) - London stocks were firmly in the red by midday on Tuesday, as worries about inflation and a global recession dented sentiment again. The FTSE 100 was down 0.8% at 7,172.99.

Neil Wilson, chief market analyst at Markets.com, said: "Money for nothing can lead you to dire straits. All too true and the European Central Bank is finding this out now.

"Everyone is looking for peak inflation...but we're probably at the point where it's at its most dangerous as it becomes sticky. High and sticky inflation is the worst combination since it means expectations have been unanchored. This will only push the Fed and other central banks to inflict more pain."

Even news that US President Biden could be rolling back some of the tariffs imposed on China during the Trump era failed to lift the mood.

On home shores, meanwhile, investors were mulling over a survey showing that growth in the services sector was stronger than expected in June.

The S&P Global/CIPS purchasing managers' index for the sector rose to 54.3 from 53.4 in May, beating expectations and the flash estimate of no change. It was also above the 50.0 mark that separates contraction from expansion for the sixth month in a row.

However, the survey also showed that new order growth declined to a 16-month low in June as economic uncertainty and rising inflation hit discretionary spending.

Meanwhile, the composite PMI - which measures activity in services and manufacturing - pushed up to 53.7 in June from 53.1 in May. But this marked the second-weakest reading so far this year. A slowdown in manufacturing production growth to its lowest since May 2020 was offset by a modest acceleration in service sector activity.

Tim Moore, economics director at IHS Markit, said: "The service sector remained in expansion mode during June, but persistently high inflation has started to dent discretionary spending and negatively influence demand projections across the board. New order growth was the weakest since the national lockdown in early-2021, with survey respondents reporting business and consumer hesitancy in response to the uncertain economic outlook.

"June data highlighted the second-fastest rise in input prices since the survey began 26 years ago, driven by intense wage pressures and rapid increases in fuel costs. Staff shortages added to demand and supply imbalances, with subsequent constraints on business capacity acting as a further incentive to defend margins from escalating operating expenses. Around 37% of the survey panel reported an increase in their charges since May and many commented on plans to push through further price rises in the second half of 2022."

In equity markets, miners retreated, with Anglo American, Antofagasta and Glencore all lower as metals prices fell.

Supermarket chain Sainsbury's edged up even as it said first-quarter underlying sales fell 4% as consumers started to cut back on discretionary spending amid the cost-of-living crisis.

Dechra Pharmaceuticals rallied to the top of the FTSE 100 after an upgrade to 'outperform' from 'sector perform' at RBC Capital Markets, which said "current levels provide an attractive entry point for what we see as a defensive business with good organic growth and history of solid execution".

Moneysupermarket was also in the black after an upgrade to 'buy' at Liberum, while Drax powered ahead after JPMorgan Cazenove put the shares on "positive catalyst watch" and said it expects the company to upgrade guidance at its interim results.

Market Movers

FTSE 100 (UKX) 7,172.99 -0.82% FTSE 250 (MCX) 18,450.28 -0.77% techMARK (TASX) 4,290.74 -0.21%

FTSE 100 - Risers

Dechra Pharmaceuticals (DPH) 3,598.00p 4.78% Croda International (CRDA) 6,730.00p 2.34% Endeavour Mining (EDV) 1,733.00p 1.76% SEGRO (SGRO) 967.20p 1.75% BT Group (BT.A) 192.00p 0.84% Ashtead Group (AHT) 3,503.00p 0.83% Sainsbury (J) (SBRY) 209.70p 0.62% Diageo (DGE) 3,516.00p 0.60% Unite Group (UTG) 1,052.00p 0.57% British Land Company (BLND) 445.30p 0.52%

FTSE 100 - Fallers

WPP (WPP) 762.40p -5.32% Anglo American (AAL) 2,715.50p -4.38% Antofagasta (ANTO) 1,059.50p -4.29% M&G (MNG) 185.20p -3.82% Rolls-Royce Holdings (RR.) 83.32p -3.72% Harbour Energy (HBR) 336.90p -3.72% Prudential (PRU) 985.00p -3.29% Glencore (GLEN) 420.95p -3.17% Smith (DS) (SMDS) 270.00p -2.74% Standard Chartered (STAN) 606.80p -2.69%

FTSE 250 - Risers

Ascential (ASCL) 267.40p 1.98% Drax Group (DRX) 660.00p 1.93% Hammerson (HMSO) 19.44p 1.91% Synthomer (SYNT) 226.60p 1.89% HGCapital Trust (HGT) 326.50p 1.87% Moneysupermarket.com Group (MONY) 179.00p 1.82% Genus (GNS) 2,578.00p 1.50% LondonMetric Property (LMP) 228.80p 1.42% Sirius Real Estate Ltd. (SRE) 87.80p 1.27% Baltic Classifieds Group (BCG) 130.60p 1.24%

FTSE 250 - Fallers

Dunelm Group (DNLM) 778.00p -4.95% Auction Technology Group (ATG) 862.00p -4.33% Just Group (JUST) 66.40p -4.25% Currys (CURY) 66.90p -4.09% Wizz Air Holdings (WIZZ) 1,714.00p -4.06% Chrysalis Investments Limited NPV (CHRY) 90.00p -3.95% TI Fluid Systems (TIFS) 146.60p -3.93% Abrdn Private Equity Opportunities Trust (APEO) 435.00p -3.33% TUI AG Reg Shs (DI) (TUI) 128.25p -3.17% Vesuvius (VSVS) 290.60p -3.13%