London open: Stocks fall after retail sales, consumer confidence data

(Sharecast News) - London stocks fell in early trade on Friday amid ongoing concerns about the situation in the Middle East, as investors mulled weaker-than-expected retail sales, a deterioration in consumer confidence and the latest government borrowing figures. At 0845 BST, the FTSE 100 was down 0.6% at 7,451.27.

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.

"The fierce headwinds of meeting the accelerating costs of heating our homes, filling our petrol tanks, coping with surging mortgage and rental rates, a slowing jobs market and now the uncertainties posed by conflict in the Middle East, are all contributing to this growing unease.

"The volatility we are seeing in consumer confidence is a sure sign of a depressed economic mood and there's no immediate prospect of any improvement."

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.

Public sector net borrowing - which is the deficit between what the government spends and what it receives in taxes - came in a £14.3bn in September. This was down £1.6bn on last September but still the sixth highest September borrowing since monthly records began in 1993, with the years during Covid and after the global financial crisis being higher.

The figure surprised many, including the Office for Budget Responsibility itself, which had forecast a rise to £20.5bn. Analysts meanwhile had pencilled in a figure closer to £18.3bn.

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.

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) 7,451.27 -0.64% FTSE 250 (MCX) 17,074.76 -0.80% techMARK (TASX) 4,038.89 -0.26%

FTSE 100 - Risers

Endeavour Mining (EDV) 1,713.00p 1.60% Rightmove (RMV) 498.70p 1.12% BAE Systems (BA.) 1,051.00p 1.01% Melrose Industries (MRO) 463.70p 0.65% London Stock Exchange Group (LSEG) 8,274.00p 0.58% Shell (SHEL) 2,768.50p 0.38% GSK (GSK) 1,455.80p 0.32% Unilever (ULVR) 3,999.50p 0.28% Burberry Group (BRBY) 1,726.00p 0.23% Dechra Pharmaceuticals (DPH) 3,786.00p 0.11%

FTSE 100 - Fallers

Anglo American (AAL) 2,091.00p -3.01% InterContinental Hotels Group (IHG) 6,004.00p -2.44% Croda International (CRDA) 4,043.00p -2.22% Mondi (MNDI) 1,225.00p -2.16% Spirax-Sarco Engineering (SPX) 8,208.00p -2.10% St James's Place (STJ) 622.40p -2.05% HSBC Holdings (HSBA) 628.40p -2.00% International Consolidated Airlines Group SA (CDI) (IAG) 139.15p -1.87% Rolls-Royce Holdings (RR.) 202.00p -1.75% Schroders (SDR) 367.80p -1.74%

FTSE 250 - Risers

IP Group (IPO) 49.30p 3.25% TI Fluid Systems (TIFS) 123.00p 2.16% Hipgnosis Songs Fund Limited NPV (SONG) 77.00p 1.32% Centamin (DI) (CEY) 83.85p 0.96% Genus (GNS) 2,216.00p 0.73% C&C Group (CDI) (CCR) 137.80p 0.58% Vietnam Enterprise Investments (DI) (VEIL) 545.00p 0.55% Victrex plc (VCT) 1,351.00p 0.52% Coats Group (COA) 69.70p 0.43% Network International Holdings (NETW) 390.00p 0.36%

FTSE 250 - Fallers

Senior (SNR) 153.80p -4.00% Aston Martin Lagonda Global Holdings (AML) 221.20p -2.81% Moonpig Group (MOON) 149.00p -2.68% Carnival (CCL) 827.40p -2.66% Man Group (EMG) 209.90p -2.46% Allianz Technology Trust (ATT) 256.00p -2.29% Wetherspoon (J.D.) (JDW) 619.50p -2.29% Jupiter Fund Management (JUP) 78.75p -2.11% TUI AG Reg Shs (DI) (TUI) 415.20p -2.03% Persimmon (PSN) 960.20p -2.02%