London close: Stocks slip as investors digest Powell's comments

(Sharecast News) - London stocks ended in negative territory on Tuesday, driven by concerns over a decline in retail sales and the impact of comments from US Federal Reserve chair Jerome Powell.

The FTSE 100 index dropped 0.66%, closing at 8,139.81 points, while the FTSE 250 saw a slightly larger decline of 0.74%, ending the session at 20,645.02 points.

In currency markets, sterling was last down 0.18% on the dollar, trading at $1.2784, while it slipped 0.08% against the euro to change hands at €1.1822.

"London's FTSE 100 showed little movement as a drop in the stock of energy company BP was balanced out by broader gains. Investors are monitoring Federal Reserve chair Jerome Powell's testimony before the US Congress," said TickMill market analyst Patrick Munnelly.

"The energy sector was a drag on the market with a 0.7% decrease, driven by a drop in BP's stock.

"BP's stock gains [for 2024] were erased by a 3.4% slide following a warning about second quarter performance.

"The company expects lower refining margins and subdued oil trading to negatively impact second quarter earnings, with an anticipated $500m to $700m hit from refining margins and $1bn to $2bn in impairment charges."

Munnelly also noted that BP projected second-quarter upstream production would be roughly flat compared to the first.

"As a result, the stock is now down 1.6% for the year, reversing the 1.8% gain as of the previous close and making it the top loser on the FTSE 100 index."

Retail sales fall slightly in the UK, Powell exudes cautious optimism on inflation

In economic news, UK retail sales experienced a slight decline in June, driven by unseasonably cool weather and broader economic concerns.

The latest BRC-KPMG retail sales monitor reported a 0.2% year-on-year decrease in overall sales, a stark contrast to the 4.9% growth seen in June last year.

Despite the drop, the decline was less severe than the three-month average fall of 1.1%.

Food sales showed some resilience, growing by 1.1% year-on-year over the three months to June, though that was a significant drop from the 9.8% growth recorded in June 2023 and below the 12-month average of 5.5%.

Non-food sales, however, faced a steeper decline, falling 2.9% year-on-year over the same period, a larger drop than the 12-month average decrease of 1.9%.

In-store non-food sales decreased by 3.7%, and online non-food sales fell by 0.7%, though the latter was a slight improvement over the previous year's decline.

"Retail sales performed poorly in June as the cooler weather during the first half of the month dulled consumer spending," said British Retail Consortium chief executive officer Helen Dickinson.

"Sales of weather-sensitive categories such as clothing and footwear, as well as DIY and gardening were hit particularly hard, especially compared to the surge in spending during last June's heatwave."

Consumer card spending in the UK also fell in June for the first time since the pandemic.

According to the Barclays UK consumer spend report, card spending decreased by 0.6% year-on-year, significantly below the 2.8% inflation rate.

Essential spending dropped by 0.9%, with grocery spending down by 2.2%.

Non-essential spending also declined by 0.5%.

However, hospitality and leisure spending rose by 3.0%, with takeaways and fast food sales increasing by 4.4%, and digital content and subscriptions surged by 9.2%, driven by popular releases.

Across the Atlantic, US Federal Reserve Chair Jerome Powell indicated cautious optimism regarding inflation control but refrained from signalling any imminent rate cuts in remarks to Congress.

Powell highlighted strong non-farm payroll growth, partly due to immigration, and emphasised the Fed's operational independence in achieving its dual mandate of maximum employment and stable prices.

Treasury Secretary Janet Yellen echoed these sentiments, noting a robust but less inflationary labour market.

Meanwhile, small business optimism in the US reached a six-month high in June, with the National Federation of Independent Business reporting an increase in its monthly optimism gauge to 91.5, up from 90.5 in May.

Despite the rise, optimism remained below the long-term average, with inflation cited as the top concern by 21% of small business owners.

BP tanks, Capita surges on software business sale

On London's equity markets, BP shares dropped 4.13% after the company announced it would face up to $2bn in asset impairments and onerous contract provisions in the second quarter.

The oil and gas giant also projected flat upstream production for the quarter and anticipated an average performance in gas marketing and trading compared to a strong first quarter.

Recruiter PageGroup fell 4.37% following a profit warning for the full year due to geopolitical and macroeconomic uncertainty.

The company now expected 2024 operating profit to be around £60m, a significant drop from £118.8m the previous year and below the £90m estimated by analysts.

Fellow recruiters SThree and Hays also saw declines.

Indivior plummeted 35.61% after the opioid addiction treatment maker downgraded its 2024 adjusted operating profit forecast to between $285m and $320m from a previous range of $330m to $380m.

The company also announced it would cut around 130 jobs.

Housebuilder Vistry Group reversed earlier gains, closing down 1.32% despite affirming its full-year expectations.

The firm reported a "strong" first half with profit expected to have increased by 7%.

Engineering and consulting company John Wood Group closed down 0.26% after also reversing earlier gains.

That came despite the company announcing a six-year contract with energy giant Shell to provide services for Shell's Prelude floating liquefied natural gas platform in Western Australia.

On the upside, Capita rocketed 21.68% following the announcement of the sale of its public sector software business for £200m, boosting investor confidence.

Kingfisher, the owner of B&Q, gained 0.6% after an upgrade to 'buy' from Deutsche Bank, enhancing its market position.

Utilities stocks were also in the green, with Severn Trent rising 1.92% and United Utilities up 1.46%, reflecting positive investor sentiment in the sector.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,139.81 -0.66% FTSE 250 (MCX) 20,645.02 -0.74% techMARK (TASX) 4,754.86 0.13%

FTSE 100 - Risers

Severn Trent (SVT) 2,553.00p 2.52% Pershing Square Holdings Ltd NPV (PSH) 4,218.00p 1.77% BT Group (BT.A) 140.45p 1.74% Smith & Nephew (SN.) 1,078.00p 1.51% Haleon (HLN) 331.50p 1.47% Entain (ENT) 640.00p 1.30% Halma (HLMA) 2,675.00p 1.25% CRH (CDI) (CRH) 5,864.00p 1.10% United Utilities Group (UU.) 1,042.00p 1.07% Vodafone Group (VOD) 71.00p 0.82%

FTSE 100 - Fallers

Burberry Group (BRBY) 857.40p -4.54% BP (BP.) 454.25p -4.30% Next (NXT) 8,674.00p -3.73% Persimmon (PSN) 1,417.50p -3.54% Melrose Industries (MRO) 562.20p -3.47% B&M European Value Retail S.A. (DI) (BME) 441.00p -3.40% Frasers Group (FRAS) 840.50p -3.00% Rolls-Royce Holdings (RR.) 447.70p -2.95% Associated British Foods (ABF) 2,437.00p -2.68% Barratt Developments (BDEV) 491.20p -2.50%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 159.50p 5.56% Moonpig Group (MOON) 199.20p 3.61% Trustpilot Group (TRST) 235.00p 3.30% Discoverie Group (DSCV) 703.00p 3.08% Auction Technology Group (ATG) 481.50p 2.45% Energean (ENOG) 1,040.00p 2.26% Marshalls (MSLH) 332.00p 2.15% Workspace Group (WKP) 604.00p 1.85% Pantheon International (PIN) 310.00p 1.64% Diversified Energy Company (DEC) 1,106.00p 1.56%

FTSE 250 - Fallers

Indivior (INDV) 756.50p -35.94% Hays (HAS) 88.95p -6.02% Watches of Switzerland Group (WOSG) 387.80p -5.04% Pagegroup (PAGE) 405.80p -3.98% C&C Group (CDI) (CCR) 158.60p -3.67% Bellway (BWY) 2,580.00p -3.44% Bakkavor Group (BAKK) 146.00p -3.31% Victrex plc (VCT) 1,120.00p -3.28% Pets at Home Group (PETS) 291.80p -3.25% Jupiter Fund Management (JUP) 81.20p -3.22%