London midday: Stocks fall further amid Middle East woes; retail sales in focus

(Sharecast News) - London stocks had fallen further by midday on Friday, with sentiment dented by ongoing concerns about the situation in the Middle East, disappointing retail sales and consumer confidence data, and rising bond yields. The FTSE 100 was down 0.9% at 7,433.10.

Richard Hunter, head of markets at Interactive Investor, said: "Markets remain unsteady and investors undecided, as rising Middle Eastern tensions and bond yields threaten to undermine any thoughts of an immediate rally.

"The end of the week could prove to be similarly awkward, with many traders unwilling to take new positions ahead of a weekend when hostilities could yet worsen. At the same time, investors were left somewhat bemused by comments from Federal Reserve Chair Powell, who seemed to oscillate between implying no further rate hikes in the immediate future, yet leaving the door open for future rises should circumstances dictate. Given the recent pressure on markets, investors had been hoping for final confirmation that the hiking cycle was over, and as such were disappointed by the comments.

"Alongside the Fed comments was another spike in bond yields, with the US 10-year Treasury briefly nudging 5%, putting additional pressure on individuals and businesses who require borrowing. The rise also puts further pressure on equities, even if more positively - and as the Fed had noted - the rise does some of the Fed's work in crimping demand and battling inflation."

On home shores, data released earlier by the Office for National Statistics showed that retail sales fell much more than expected in September as unseasonably warm weather dented clothing sales.

Sales were down 0.9% on the month following a 0.4% increase in August, versus consensus expectations for a 0.2% decline. On the year, sales fell 1% in September following a 1.3% drop a month earlier.

The data showed that sales at both clothing stores and department stores fell 1.6%. Meanwhile, non-store retailing sales declined 2.2% in September, with retailers reporting a hit from the unseasonably warm weather and the ongoing cost-of-living crisis.

ONS chief economist Grant Fitzner said: "Retail sales fell notably in September with retailers telling us that cost-of-living pressures are influencing consumers, particularly for sales of non-essential goods.

"It was a poor month for clothing stores as the warm autumnal conditions reduced sales of colder weather gear.

"However, September's unseasonable warmth did help drive up food sales a little, and fuel sales rebounded from last month's fall."

Investors were also digesting an uninspiring survey from GfK, which showed that the confidence index fell nine points to -30 in October, reversing two months of improving scores, as growing economic uncertainty weighed heavily.

Within that, the steepest drop was seen in the major purchase index, which tumbled 14 points to -34.

Expectations for personal finances for the next 12 months fell by six points to -8, while expectations for the general economic situation slipped eight points to -32.

Joe Staton, client strategy director at GfK, said: "This sharp fall underlines that the cost-of living-crisis, and simply not having enough money to make ends meet, are still exerting acute pressure for many consumers."

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "While no one was expecting the month to be a bright spot for the high street, the full picture suggests a harsher-than-expected reining in of discretionary spending. In value terms, spending is robust - largely because of inflation, but volumes are dropping.

"The confidence knock of spending more to get less has also shown up in the GfK consumer confidence index which has seen its biggest month-on-month decline in over three years. It now sits at minus 30, at levels last seen when the government introduced strict Covid-19 rules. This is a worse slide than expected and speaks to growing anxiety and the potential that we're looking at a steeper consumer pullback than forecast as we head into the Christmas trading season."

Separate figures from the ONS showed that government borrowing unexpectedly fell last month, but still managed to register the sixth-highest level since records began.

Corporate news was thin on the ground, but InterContinental Hotels Group fell after it reported a big slowdown in RevPAR - a key performance measure used in the hospitality industry - in the third quarter as growth softened across all regions. However, the group said it still expects a "very strong financial performance" this year.

HSBC was knocked lower by a downgrade to 'market perform' at KBW.

Outside the FTSE 350, ProCook shares tumbled after the kitchenware retailer posted a decline in second-quarter revenue and sounded a cautious note on its outlook, noting that trading in September and into early October was "markedly softer".

On the upside, gold producer Endeavour Mining was the top gainer on the FTSE 100 as gold prices got a boost from a flight to safety.

Market Movers

FTSE 100 (UKX) 7,433.10 -0.89% FTSE 250 (MCX) 17,117.53 -0.56% techMARK (TASX) 4,034.03 -0.38%

FTSE 100 - Risers

Endeavour Mining (EDV) 1,718.00p 1.90% BAE Systems (BA.) 1,052.00p 1.11% Convatec Group (CTEC) 198.30p 1.07% London Stock Exchange Group (LSEG) 8,294.00p 0.83% Hargreaves Lansdown (HL.) 697.80p 0.81% Melrose Industries (MRO) 464.30p 0.78% Burberry Group (BRBY) 1,728.00p 0.35% Mondi (MNDI) 1,256.00p 0.32% St James's Place (STJ) 637.00p 0.25% Rentokil Initial (RTO) 484.90p 0.21%

FTSE 100 - Fallers

InterContinental Hotels Group (IHG) 5,930.00p -3.64% Anglo American (AAL) 2,079.50p -3.55% HSBC Holdings (HSBA) 620.90p -3.17% JD Sports Fashion (JD.) 126.65p -2.58% Admiral Group (ADM) 2,426.00p -2.53% IMI (IMI) 1,479.00p -2.38% International Consolidated Airlines Group SA (CDI) (IAG) 138.50p -2.33% Spirax-Sarco Engineering (SPX) 8,196.00p -2.24% Marks & Spencer Group (MKS) 213.00p -2.20% Hikma Pharmaceuticals (HIK) 1,951.00p -2.06%

FTSE 250 - Risers

IP Group (IPO) 49.60p 3.87% Mobico Group (MCG) 58.15p 2.92% C&C Group (CDI) (CCR) 140.60p 2.63% Foresight Solar Fund Limited (FSFL) 89.00p 2.53% Hipgnosis Songs Fund Limited NPV (SONG) 77.90p 2.50% 888 Holdings (DI) (888) 83.60p 2.45% PureTech Health (PRTC) 168.40p 2.43% Kainos Group (KNOS) 1,120.00p 2.00% Petershill Partners (PHLL) 149.00p 1.78% Bakkavor Group (BAKK) 91.80p 1.77%

FTSE 250 - Fallers

Ceres Power Holdings (CWR) 199.20p -8.79% Me Group International (MEGP) 138.40p -7.11% Aston Martin Lagonda Global Holdings (AML) 218.40p -4.04% Foresight Group Holdings Limited NPV (FSG) 349.00p -3.32% Carnival (CCL) 823.20p -3.15% Energean (ENOG) 899.50p -3.02% Genuit Group (GEN) 270.00p -2.53% Tyman (TYMN) 241.00p -2.43% Baltic Classifieds Group (BCG) 199.40p -2.25% FDM Group (Holdings) (FDM) 420.50p -2.21%