Stocks in London pulled back on Wednesday, as weak US jobs data fuelled worries about an economic slowdown.
The FTSE 100 index closed down 28.86 points, 0.4%, at 8,269.60. The FTSE 250 ended down 23.53 points, 0.1%, at 20,785.03, and the AIM All-Share closed down 2.73 points, 0.4%, at 759.66.
The Cboe UK 100 ended down 0.5% at 826.75, the Cboe UK 250 closed down 0.2% at 18,286.84, and the Cboe Small Companies ended down 0.4% at 16,885.20.
In European equities on Wednesday, the CAC 40 in Paris closed down 0.9% and the DAX 40 in Frankfurt fell 0.8%.
In New York at the time of the London close, the Dow Jones Industrial Average was up 0.1%, the S&P 500 was 0.1% lower and the Nasdaq Composite was 0.2% worse off.
US markets stabilised after a bruising session on Tuesday which saw the technology laden Nasdaq Composite shed 3.3% with Nvidia alone down 9.5%.
The fresh falls followed weak manufacturing data on Tuesday adding to jitters as to the health of the US economy.
Figures on Wednesday seemed to back this narrative, showing the US labour market was softening.
The US Bureau of Labour Statistics said the number of job openings fell to 7.673 million on the last business day of July from a downwardly revised total of 7.910 million in June. It was the lowest total since 2021.
Economists had projected openings to total 8.090 million, according to a Investing.com cited consensus.
June’s figure was revised down by 274,000.
Wednesday’s figures come ahead of Friday’s eagerly awaited nonfarm payrolls. The data will likely determine the pace of interest rate cuts by the Federal Reserve.
Bank of America said the August jobs report is ‘crucial for Fed policy’.
Nonfarm payrolls has ‘regained its crown’ as the most important data release for stocks Into the print, BofA said, noting futures are pricing in 100 basis points of rate cuts for the rest of 2024.
‘Equities seem more excited about the cuts than concerned about a potential recession, gauging by their return to near highs and the outperformance of small caps & equal-weighted S&P. If that’s true, the main risk for equities this week is a hot NFP that reprices short-term rates higher,’ the bank added.
In Canada, the central bank lowered interest rates for a third meeting in a row, as expected.
The Bank of Canada cut the overnight rate by 25 basis points to 4.25%, citing easing inflation pressures, rising unemployment and a cooling economy.
The US data pushed the dollar lower.
The pound was quoted at $1.3147 at the London equities close Wednesday, higher compared to $1.3089 at the close on Tuesday. Against the yen, the dollar was trading at JP¥144.24, down compared to JP¥145.85.
The euro stood at $1.1079, up against $1.1037.
Back in the UK, and the mood music on the economy continues to be good.
The seasonally adjusted services UK PMI business activity index registered 53.7 in August, up from 52.5 in July, and higher than an initial flash estimate of 53.3.
According to S&P Global, survey respondents said this rise in business activity was in part down to an ‘improving economic backdrop’, and an associated rise in ‘willingness to spend’.
The seasonally adjusted UK PMI composite output index rose to 53.8 in August, from 52.8 in July. This was higher than the initial flash estimate of 53.4.
Higher levels of output were seen in both the manufacturing and service sectors, with data also revealing ‘a sustained upturn in private sector employment’.
Kathleen Brooks, research director at XTB said it was ‘another piece of good news for the UK economy’.
‘This is the highest reading since April and bodes well for [third quarter] growth, after the manufacturing survey for August also bucked global trends for weaker manufacturing sentiment and posted a decent 52.5.’
On London’s FTSE 100, Rolls-Royce continued to rally after Monday’s falls, rising 1.9%, while a ’buy’ recommendation from Citi supported Melrose, up 1.3%.
But Barratt Developments fell 2.9% after seeing annual profit drop by more than three-quarters.
For the year ended June 30, the Leicestershire, England-based housebuilder posted pretax profit of £170.5 million, down 76% from £705.1 million a year prior.
Revenue fell by 22% to £4.17 billion from £5.32 billion, while total home completions came to 14,004, a 19% decline from 17,206 last year.
‘Despite all the talk that the UK property market has shown resilience in the face of high borrowing costs, the backdrop has not created a rich environment for Barratt Developments to prosper,’ concurred AJ Bell analyst Russ Mould.
‘A slump in annual profits is the result of lower home completions, weaker average selling prices and reduced margins,’ Mould added.
The news dragged others in the sector lower too. Persimmon slipped 3.3%, Vistry fell 2.5% and Taylor Wimpey declined 2.3%.
Luxury good retailer Burberry was out of fashion, falling 3.7% ahead of an expected demotion from the FTSE 100.
The luxury-goods maker‘s exit after 15 years in the blue-chip index is set to be confirmed after markets close Wednesday, with insurer Hiscox poised to take its place.
Recently-floated Raspberry Pi Holdings is set to be the only promotion to the FTSE 250 index, at the expense of IP Group.
Direct Line fell 2.2% after interim pretax profit and dividend fell short of market expectations, despite a marked improvement from the year before.
In the six months to June 30, the London-based insurer posted a pretax profit of £61.6 million, swinging from a loss of £76.3 million a year prior.
Gross written premiums rose 54% to £1.84 billion from £1.20 billion.
Net insurance margin picked up to 1.8% from negative 8.8% a year ago. Motor margin improved to negative 3.0% from negative 25.6% a year ago. Non-motor margin fell to 11.6% from 19.7%.
The firm restored the dividend with a 2.0 pence interim payout after passing a year ago.
Panmure Liberum analyst Abid Hussain reflected on the mixed results, noting positively that gross written premiums were 5% ahead of consensus. But he said pretax profit was a 13% miss while the dividend was also below forecast.
‘Management is expecting to continue to improve margins by taking pricing and cost reductions; this will take time, in our view,’ he added.
Segro fell 1.3% after agreeing a deal to buy Tritax EuroBox, which rose 1.6%.
Under the deal Tritax EuroBox shareholders will receive 0.0765 of a new Segro share for every one held in Tritax EuroBox.
In addition, Tritax EuroBox shareholders will receive a dividend of around 1.05 pence per share in respect of the quarter to September 30.
Including debt, the deal implies an enterprise value of around £1.10 billion.
The move by Segro comes after Brookfield Global Asset Management said in June that it was in the early stages of considering a cash offer for Tritax EuroBox.
Tritax EuroBox then said in July that it had attracted interest from other possible suitors, as well as Brookfield.
The oil price remained under pressure. Brent oil was quoted at $73.28 a barrel at the London equities close Wednesday down from $74.19 late Tuesday.
But gold perked up, rising to $2,495.10 an ounce, from $2,482.65 on Tuesday.
Thursday’s corporate diary sees half-year results from housebuilder Vistry and a trading statement from electronics retailer Currys.
The global economic calendar has weekly jobless claims figures in the US plus a raft of construction PMI readings.
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