Stocks in London drifted lower by the close on Thursday, as more weak US jobs data tested nerves ahead of Friday’s nonfarm payrolls data.
The FTSE 100 index closed down 27.89 points, 0.3%, at 8,241.71. The FTSE 250 ended down 46.11 points, 0.2%, at 20,762.50, and the AIM All-Share closed down 0.54 of a point, 0.1%, at 759.12.
The Cboe UK 100 ended down 0.2% at 825.08, the Cboe UK 250 closed up 0.2% at 18,320.16, and the Cboe Small Companies ended up slightly at 16,891.36.
In European equities on Thursday, the CAC 40 in Paris closed down 0.9% and the DAX 40 in Frankfurt ended little changed.
In New York at the time of the London close, the Dow Jones Industrial Average was down 0.9%, the S&P 500 was down 0.6% and the Nasdaq Composite was 0.1% lower.
Ahead of Friday’s eagerly awaited nonfarm payrolls, data painted a mixed picture of the US economy.
S&P Global’s US services purchasing managers’ index rose to 55.7 points in August from 55.0 in July. The reading was ahead of the flash estimate of 55.2.
However, despite rising activity and new business, US services firms cut staffing levels for first time in three months.
‘Respondents often reported that leavers had not been replaced, mostly due to cost considerations,’ S&P Global said.
Also on Thursday, the Institute for Supply Management released its PMI for the US services sector.
The ISM PMI ticked up to 51.5 in August from 51.4 in July, marking the sixth month of expansion in 2024. It was higher than FXStreet-cited market consensus of 51.1.
The sub-index for business activity eased to 53.3 from 54.5, while new orders rose to 53.0 from 52.6, and employment eased to 50.2 from 51.1.
Stephen Brown, an economist at Capital Economics said: ‘Although the ISM services index was essentially unchanged in August, that is still something of a relief following the weak ISM manufacturing report earlier this week and the gloomy tone of the Fed’s Beige Book, released yesterday.’
Oliver Allen at Pantheon Macroeconomics agreed.
‘The lack of a further fall in the index should allay fears of an imminent recession, but this is still a relatively weak report.’
Meanwhile, the US private sector added fewer jobs than expected last month, numbers from payroll processor ADP showed.
According to ADP, private sector employment increased by 99,000 jobs in August, easing from 111,000 in September, and falling short of the FXStreet cited consensus of 145,000.
Separate data from the US Department of Labor on Thursday showed initial jobless claims eased slightly in the most recent week.
In the week to August 31, new claims totalled 227,000, easing from 232,000 a week prior. The prior week’s level was upwardly revised from 231,000.
The latest figure landed below the FXStreet cited consensus of 230,000.
The pound was quoted at $1.3160 at the London equities close Thursday, higher compared to $1.3147 at the close on Wednesday. Against the yen, the dollar was trading at JP¥143.94, down compared to JP¥144.24.
The euro stood at $1.1082, up against $1.1037.
There was encouraging news on the UK economy, following positive updates on the manufacturing, service sector and retail sales earlier in the week.
UK construction companies enjoyed a sustained rebound in activity in August, according to data from S&P Global on Thursday, though the pace of this recovery moderated from July.
The headline construction purchasing managers’ index registered 53.6 in August, lower than 55.3 in July, and FXStreet-cited consensus of 54.9.
Commercial activity was the best-performing segment, despite the pace of growth slipping. Civil engineering activity meanwhile expanded at only a moderate pace that was notably weaker than in July.
‘The UK construction sector appears to have turned a corner after a difficult start to 2024,’ said Tim Moore, economics director at S&P Global Market Intelligence.
The news provided a lift to housebuilders Barratt Developments, up 1.8%, and Berkeley Group, up 1.9%.
Another builder on the rise was Vistry, which jumped 6.8%.
Kent, England-based Vistry reported growth in half-year profit and announced a new share buyback.
Pretax profit rose 37% to £156.7 million in the six months that ended June 30 from £114.2 million a year before. Revenue was £1.72 billion, up 9.4% year on year from £1.58 billion.
Given the strength of its adjusted earnings, Vistry also announced an interim ordinary distribution of £55 million and a special distribution of £75 million. The combined £130 million will be in the form of a share buyback and is expected to begin this month.
Analysts at Stifel commented: ‘Vistry has won over the sceptics in its transformation, but further rerating is possible as the capital base reduces and returns improve further. The new £130 million buyback is a further step on this journey.’
Utilities were a firm feature, with gains for SSE, up 3.0%, United Utilities up 2.6% and National Grid, up 1.7%.
Morgan Stanley said it sees a ‘constructive setup’ for European Utilities from a macro perspective given the rate cutting cycle and recent pathway on bond yields.
National Grid is its top European pick.
‘We rate the sector attractive with policy tailwinds for EPS growth not reflected in valuation discount to market, underperformance year-to-date,’ the broker said.
Leading the blue-chip fallers, AB Foods fell 8.5% after warning falling sugar prices would see profits in the division fall below expectations.
The firm also also bemoaned the impact of bad weather, as it reported a drop in like-for-like sales in the fourth quarter for its discount retailer, Primark.
‘Primark has had a good run but it is not immune to the vagaries of the British weather and owner Associated British Food’s year-end trading update reveals the retail chain has been hit by the soggy summer,’ explained AJ Bell analyst Russ Mould.
The bad weather resulted in lower footfall and particularly impacted sales of seasonal lines in womenswear and footwear, AB Foods explained. But while volumes were soft, the average selling price increased as a result of mix.
AstraZeneca fell 2.7%.
AstraZeneca told the Financial Times that a ‘small number’ of its employees are under investigation by police in China, following a report they had been detained over possible infringement of data privacy laws and importing unlicensed medications.
Police in Shenzhen have detained five current and former employees over the collection of patient data and the distribution of a liver cancer drug that had not been approved in the country, Bloomberg reported earlier on Thursday.
In London’s FTSE 250, RS Group rose 1.5% as Citi upgraded to ’buy’ from ‘neutral’ and increased its share price target to 900 pence from 800p.
Citi said RS’s new management team have articulated an ‘attractive, comprehensive strategy, including ambitious margin targets’ likely to be detailed at its Capital Markets Day on September 24.
Bakkavor was also in demand, up 2.3%, after it upgraded the full-year outlook after a ‘strong first half’.
The London-based ‘fresh prepared’ food manufacturer said that in the first six months of this year, pretax profit jumped 39% to £45.2 million from £32.6 million the year before.
The company said it now expects between £108 million to £112 million in adjusted operating profit for 2024, ‘ahead of market expectations’. Bakkavor’s compiled consensus puts the target at £106.2 million, or between £103.7 million and £107.7 million.
The oil price picked up for a while after CNBC, and others, reported members of the OPEC+ oil alliance have delayed plans to hike production by a scheduled 180,000 barrels per day in October.
The increase has been delayed by two months, according to two OPEC+ sources, CNBC said.
However, initial enthusiasm soon faded. Brent oil was quoted at $73.01 a barrel at the London equities close Thursday down from $73.28 late Wednesday.
Gold rose to $2,505.80 an ounce, from $2,495.10 on Wednesday.
The global economic calendar on Friday sees the US Jobs Report at 1330 BST.
Copyright 2024 Alliance News Ltd. All Rights Reserved.
