London midday: Stocks a touch weaker as Barclays drags banks lower

(Sharecast News) - London stocks were just a touch weaker by midday on Tuesday, with banks under the cosh after a disappointing update from Barclays, as investors mulled a raft of economic releases. The FTSE 100 was down 0.1% at 7,370.93, off earlier lows.

Market participants were digesting the latest figures from the Office for National Statistics, which showed the unemployment rate ticked up to 4.2% in the three months to August from 4.0% in the three months to July.

This was the ONS' first month using new methodology to calculate the rate.

The ONS explained that due to increased uncertainty around the Labour Force Survey (LFS) estimates, it was publishing an alternative series of estimates of employment, unemployment, and economic inactivity as experimental statistics.

The experimental figures were derived using growth rates from pay as you earn real-time information and the claimant count for the periods from May to July 2023 onwards.

"This is to provide a more holistic view of the state of the labour market while the LFS estimates are uncertain," it said.

The data also showed that the employment rate declined by 0.3 percentage point to 75.7%, while employment fell by 82,000 following a 133,000 drop in the previous quarter (-207,000 on the old series).

ONS director of economic statistics Darren Morgan said: "Today we have produced a new metric, produced by adjusting our headline survey estimates using robust administrative data sources that we receive from other government departments. This maintains the accuracy of our key statistics.

"This new metric shows that in the latest period the employment rate was down a little, with small rises in the rates for both unemployment and those neither working nor looking for work."

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "The ONS' experimental estimates of the labour market data continue to suggest that labour market slack is developing more quickly that the MPC expected in August's Monetary Policy Report, adding to the evidence the Committee will keep Bank Rate at 5.25% at next month's meeting."

Meanwhile, a survey showed that business activity in the services sector fell again in October.

The S&P Global/ CIPS flash services business activity index dipped to 49.2 from 49.3 in September, falling for the third month in a row. Economists were expecting the reading to be unchanged on the month.

The manufacturing output index ticked up to 45.3 in October from 44.6 a month earlier.

A reading above 50.0 indicates expansion, while a reading below signals expansion.

The composite output index - which measures activity in the manufacturing and services sectors - nudged up to 48.6 from 48.5, but remained below 50.0 for the third month running. Analysts were expecting an unchanged reading.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output.

"The overall pace of decline remains only modest, signalling a mere 0.1% quarterly rate of GDP decline, but gloom about the outlook has intensified in the uncertain economic climate, boding ill for output in the coming months. A recession, albeit only mild at present, cannot be ruled out."

A separate survey from the Confederation of British Industry showed that manufacturers suffered the worst monthly fall in orders in October since January 2021.

The CBI's monthly industrial orders balance declined to -26 from -18 in September, missing expectations for an improvement to -16. The survey also showed that manufacturers cut employees "marginally" in the three months to October, and for the first time since January 2021.

CBI deputy chief economist Anna Leach said: "The warning lights are flashing red in our latest manufacturing survey, with business sentiment deteriorating, output volumes falling and manufacturers becoming more cautious over their employment and investment plans.

"Amidst a difficult environment for manufacturers, the Chancellor should use the Autumn Statement to build confidence and get the sector firing again, through a focus on skills development, encouraging business investment and grasping substantive net zero opportunities."

In equity markets, Barclays slid as its third-quarter headline profits beat analysts' forecasts, but the bank cut its guidance for retail banking net interest margin (NIM) for 2023. The full-year net interest margin - the difference between interest income and the amount it pays back in interest on deposits - was revised to 3.05-3.10%, from earlier guidance of 3.15-3.20%.

Other banks followed suit, with NatWest, Lloyds and Standard Chartered all down.

B&Q owner Kingfisher was in the red as JPMorgan Cazenove reiterated its 'underweight' stance on the shares and placed them on 'negative catalyst watch' ahead of the third-quarter trading update next month.

"We remain of the view that cons FY 25 forecasts for both the UK and France are over ambitious (we sit circa 10% below cons on FY 25 profit before tax), particularly with the latter seeing signs of a weakening consumer," JPM said.

Bunzl fell as it backed full-year guidance for adjusted operating profit but reported a decline in third-quarter sales and said full-year revenue was expected to be "slightly lower" than in 2022 at constant exchange rates.

CAB Payments tanked as the payment processing firm warned on full-year revenues, pointing to changes in market conditions in some of its key currency corridors, as well as ongoing uncertainties surrounding the Naira.

Softcat was sharply lower after full-year revenues missed analysts' expectations, while Pets at Home was dented by a downgrade to 'hold' from 'buy' at Shore Capital.

On the upside, Plus500 surged after saying it was on track to deliver revenue and EBITDA for FY 2023 in-line with recently upgraded market expectations.

Market Movers

FTSE 100 (UKX) 7,370.93 -0.05% FTSE 250 (MCX) 16,995.57 -0.37% techMARK (TASX) 4,004.59 -0.14%

FTSE 100 - Risers

Airtel Africa (AAF) 115.60p 3.21% Centrica (CNA) 158.15p 2.20% SSE (SSE) 1,596.00p 1.88% Severn Trent (SVT) 2,559.00p 1.83% United Utilities Group (UU.) 1,030.50p 1.83% Rio Tinto (RIO) 4,976.00p 1.75% BP (BP.) 539.20p 1.32% AstraZeneca (AZN) 10,222.00p 1.21% National Grid (NG.) 967.20p 1.04% Rolls-Royce Holdings (RR.) 205.60p 1.03%

FTSE 100 - Fallers

Barclays (BARC) 135.50p -5.93% Bunzl (BNZL) 2,802.00p -3.84% St James's Place (STJ) 620.00p -2.64% NATWEST GROUP (NWG) 211.00p -2.00% Kingfisher (KGF) 200.70p -1.62% Lloyds Banking Group (LLOY) 40.78p -1.53% Endeavour Mining (EDV) 1,692.00p -1.51% 3i Group (III) 2,000.00p -1.43% Rentokil Initial (RTO) 455.30p -1.39% Standard Chartered (STAN) 707.60p -1.37%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,396.00p 6.81% Drax Group (DRX) 431.00p 5.20% Ithaca Energy (ITH) 171.20p 3.76% TUI AG Reg Shs (DI) (TUI) 414.40p 2.68% Energean (ENOG) 848.50p 2.29% Future (FUTR) 872.00p 2.29% Bakkavor Group (BAKK) 92.00p 2.22% Wood Group (John) (WG.) 141.20p 1.73% Primary Health Properties (PHP) 86.95p 1.70% Pennon Group (PNN) 692.00p 1.62%

FTSE 250 - Fallers

CAB Payments Holdings (CABP) 58.90p -72.79% Softcat (SCT) 1,190.00p -15.30% Jupiter Fund Management (JUP) 76.35p -4.32% Essentra (ESNT) 148.20p -4.14% Hipgnosis Songs Fund Limited NPV (SONG) 72.70p -3.58% IP Group (IPO) 47.15p -3.48% Mobico Group (MCG) 59.40p -3.41% Lancashire Holdings Limited (LRE) 555.50p -3.05% Computacenter (CCC) 2,474.00p -2.98% Bytes Technology Group (BYIT) 461.40p -2.53%