London open: Stocks fall as investors mull borrowing figures

(Sharecast News) - London stocks edged lower in early trade on Tuesday despite strong gains on Wall Street, as investors mulled a surge in public borrowing. At 0825 GMT, the FTSE 100 was down 0.2% at 7,768.01.

According to data released earlier by the Office for National Statistics, government borrowing hit a record high in December, mostly due to the household energy support scheme and high debt interest costs.

Public sector net borrowing came in at £27.4bn, up £16.7bn on December 2021.

This marked the highest December figure since records began in January 1993 and was above consensus expectations of £17.8bn and the Office for Budget Responsibility's forecast of £17.6bn.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Public borrowing was high again in December due to the surging inflation, the high cost of subsidising households' energy bills and the decision to reverse April's National Insurance hike.

"Most of the difference between the ONS' first estimate and the OBR's forecast, however, can be explained by the treatment of student loans. Changes to the terms of student loan contracts earlier this year prompted the OBR to revise up the valuation of outstanding loans by £8.6bn; it credited this to the governments' accounts in December as a capital transfer from the private sector to central government. The ONS has decided to wait for more data to become available before incorporating this windfall into its borrowing estimates."

Ruth Gregory, senior UK economist at Capital Economics, said: "Overall, today's worse-than-expected public finances figures will only embolden the Chancellor in the Budget on 15th March to keep a tight grip on the public finances and mean that he waits until closer to the next general election, perhaps in 2024, before announcing any significant tax cuts."

In equity markets, Primark owner Associated British Foods was in the red even as it posted a 20% rise in sales during the Christmas period as consumers continued to hunt for bargains amid the cost-of-living crisis.

The company, which also has agriculture, sugar and food ingredients operations, said revenue in the 16 weeks to January 7 rose to £6.7bn, with Primark sales up 18% to £3.1bn. Group full-year expectations remain unchanged.

Senior surged to the top of the FTSE 250 after it said adjusted pre-tax profit for 2022 was set to be above the top end of the range of consensus expectations following a strong performance from its Flexonics division. The range is between £16.2m and £18m.

In broker note action, Direct Line was hit by a downgrade to 'sell' at Citi, while DS Smith was boosted by an upgrade to 'outperform' at Davy.

Sage was weaker after a downgrade to 'add' from 'buy' at Numis.

Market Movers

FTSE 100 (UKX) 7,768.01 -0.21% FTSE 250 (MCX) 19,829.72 0.14% techMARK (TASX) 4,440.71 -0.40%

FTSE 100 - Risers

Smurfit Kappa Group (CDI) (SKG) 3,513.00p 1.30% Smith (DS) (SMDS) 355.40p 1.14% Fresnillo (FRES) 880.60p 1.06% United Utilities Group (UU.) 1,058.00p 0.62% Abrdn (ABDN) 207.50p 0.58% M&G (MNG) 208.50p 0.58% CRH (CDI) (CRH) 3,663.50p 0.56% Burberry Group (BRBY) 2,377.00p 0.55% Persimmon (PSN) 1,402.00p 0.50% Convatec Group (CTEC) 247.40p 0.49%

FTSE 100 - Fallers

AstraZeneca (AZN) 10,826.00p -1.92% Sage Group (SGE) 759.20p -0.97% Glencore (GLEN) 573.00p -0.88% RS Group (RS1) 945.50p -0.47% Shell (SHEL) 2,355.00p -0.44% Associated British Foods (ABF) 1,861.50p -0.43% Informa (INF) 652.20p -0.40% SEGRO (SGRO) 804.00p -0.40% Johnson Matthey (JMAT) 2,140.00p -0.37% Experian (EXPN) 2,943.00p -0.37%

FTSE 250 - Risers

Senior (SNR) 147.60p 8.21% Molten Ventures (GROW) 398.00p 3.92% Shaftesbury (SHB) 386.60p 2.82% Hammerson (HMSO) 26.69p 2.50% Telecom Plus (TEP) 2,090.00p 2.45% Softcat (SCT) 1,247.00p 1.96% Aston Martin Lagonda Global Holdings (AML) 169.85p 1.95% 888 Holdings (DI) (888) 98.25p 1.76% Redrow (RDW) 532.00p 1.72% Elementis (ELM) 123.20p 1.65%

FTSE 250 - Fallers

PZ Cussons (PZC) 206.00p -1.67% Direct Line Insurance Group (DLG) 172.90p -1.59% Pagegroup (PAGE) 448.20p -1.23% Witan Inv Trust (WTAN) 224.50p -1.10% Vesuvius (VSVS) 421.20p -1.03% Serco Group (SRP) 155.10p -0.96% Harbour Energy (HBR) 323.30p -0.89% JPMorgan American Inv Trust (JAM) 675.00p -0.74% Trainline (TRN) 306.00p -0.68% JPMorgan Emerging Markets Inv Trust (JMG) 117.60p -0.68%