London midday: Stocks turn lower as Shell slides on profit warning

(Sharecast News) - London stocks had turned lower by midday on Thursday, with Shell under the cosh after a profit warning. The FTSE 100 was down 0.6% at 7,007.20, while sterling was 0.6% lower versus the dollar at 1.1264, after Fitch downgraded the UK's credit outlook and as investors digested the latest reading on the construction sector.

Late on Wednesday, Fitch downgraded the UK's credit outlook to "negative" from "stable", citing the government's recently-announced mini-budget.

Fitch said: "The large and unfunded fiscal package announced as part of the new government's growth plan could lead to a significant increase in fiscal deficits over the medium term."

The ratings agency maintained its AA- credit rating for the UK. This is one notch lower than Standard & Poor's.

AJ Bell investment director Russ Mould said: "The gilt market is once again under pressure as a second ratings agency effectively puts the UK on watch for a credit downgrade. The current government still has a job on its hands to convince it has a handle on the country's finances"

Investors were also mulling a survey showing that the UK construction sector returned to growth in September, but business expectations hit a 26-month low.

The S&P Global/CIPS construction purchasing managers' index rose to 52.3 from 49.2 in August, coming above the 50.0 mark that separates contraction from expansion. The reading was comfortably ahead of consensus expectations of 48.0.

House building was the best-performing category, with growth reaching a five-month high. Commercial work increased only marginally, while civil engineering activity fell for the third month in a row.

The survey also showed that business optimism for the coming 12 months pointed to the weakest growth projections since July 2020. While construction firms often commented on expected growth due to forthcoming new projects, many also suggested that recession risk and higher interest rates had weighed on confidence.

In equity markets, Shell slumped as it warned third-quarter profits would be hit by a sharp decline in oil refining margins and weaker natural gas trading.

Victoria Scholar, head of investment at Interactive Investor, said: "Shell enjoyed record profits in the first and second quarter spurred by a surge in underlying oil and gas prices following Russia's invasion of Ukraine. However, since June, oil has posted four consecutive months of declines, with Brent crude down by around 25% even after this week's countertrend rally.

"In what is a notoriously cyclical business, Shell is grappling with a dysfunctional and volatile gas market as well as expectations of softening oil demand, particularly from China as the global economy cools."

Elsewhere, DS Smith, Centrica, Kingfisher and Synthomer fell as they traded without entitlement to the dividend.

On the upside, tobacco company Imperial Brands jumped to the top of the FTSE 100 as it unveiled a £1bn share buyback and said current year trading was in line with expectations.

RS Group - formerly Electrocomponents - rallied after it said full-year revenue and adjusted pre-tax profit were set to be "slightly ahead" of current consensus estimates following strong trading year to date.

Volution racked up strong gains after full-year results, while Chemring was a high riser after a well-received trading update.

Market Movers

FTSE 100 (UKX) 7,007.20 -0.64% FTSE 250 (MCX) 17,568.23 0.03% techMARK (TASX) 4,179.41 0.03%

FTSE 100 - Risers

Imperial Brands (IMB) 1,965.00p 3.58% SEGRO (SGRO) 742.80p 2.57% RS Group (RS1) 1,026.00p 1.99% Informa (INF) 542.20p 1.92% Prudential (PRU) 943.40p 1.79% Haleon (HLN) 283.40p 1.78% Fresnillo (FRES) 818.20p 1.69% Convatec Group (CTEC) 211.40p 1.54% Dechra Pharmaceuticals (DPH) 2,582.00p 1.41% Intermediate Capital Group (ICP) 1,087.00p 1.40%

FTSE 100 - Fallers

Shell (SHEL) 2,271.00p -4.52% Smith (DS) (SMDS) 248.70p -3.79% Anglo American (AAL) 2,781.50p -3.08% Kingfisher (KGF) 220.70p -2.13% Centrica (CNA) 70.30p -1.84% Barclays (BARC) 145.04p -1.75% St James's Place (STJ) 1,011.50p -1.70% BP (BP.) 453.25p -1.51% Rolls-Royce Holdings (RR.) 72.81p -1.50% Glencore (GLEN) 493.30p -1.40%

FTSE 250 - Risers

Volution Group (FAN) 334.00p 8.97% Chemring Group (CHG) 323.50p 6.41% CMC Markets (CMCX) 233.50p 4.94% 4Imprint Group (FOUR) 3,655.00p 2.67% PureTech Health (PRTC) 249.50p 2.25% Currys (CURY) 64.15p 2.23% Auction Technology Group (ATG) 790.00p 2.20% SSP Group (SSPG) 201.50p 2.18% Plus500 Ltd (DI) (PLUS) 1,738.00p 2.18% W.A.G Payment Solutions (WPS) 88.80p 2.07%

FTSE 250 - Fallers

Synthomer (SYNT) 104.20p -7.38% Vistry Group (VTY) 572.50p -5.06% Ferrexpo (FXPO) 126.50p -4.09% Vietnam Enterprise Investments (DI) (VEIL) 615.00p -3.45% Bank of Georgia Group (BGEO) 1,934.00p -3.30% NB Private Equity Partners Ltd. (NBPE) 1,575.00p -2.78% Bodycote (BOY) 497.00p -2.17% Moonpig Group (MOON) 157.60p -2.11% Morgan Sindall Group (MGNS) 1,518.00p -1.94% RIT Capital Partners (RCP) 2,110.00p -1.86%