Stocks in London dropped sharply alongside other global equity markets on Monday, after last week’s data pointed to signs of trouble in the world’s largest economy.
The FTSE 100 index was down 198.60 points, 2.4%, at 7,976.11. The FTSE 250 was down 650.53 points, 3.1%, at 20,175.82, and the AIM All-Share was down 22.11 points, 2.9%, at 749.16.
The Cboe UK 100 was down 2.3% at 796.29, the Cboe UK 250 was down 3.1% at 17,674.20, and the Cboe Small Companies was down 2.1% at 16,629.12.
In European equities on Monday, the CAC 40 in Paris was down 2.3%, while the DAX 40 in Frankfurt was down 2.6%.
Stocks in New York were called to open lower on Monday, extending Friday’s losses. The Dow Jones Industrial Average was called down 1.9%, the S&P 500 index down 2.9%, and the Nasdaq Composite down 4.5%.
‘Friday’s brutal sell off has continued into the new week as investors mull the prospect that the much-touted US soft landing looks like being a whole lot bumpier than markets had hoped,’ said AJ Bell head of financial analysis, Danni Hewson.
‘Circuit breakers have been firing on Asian markets as stocks tumbled, with investors scurrying to price the impact a stalling US economy is likely to have.’
In Asia on Monday, the Nikkei 225 index in Tokyo closed down 12%, giving back its year-to-date gains. In China, the Shanghai Composite was down 1.5%, while the Hang Seng index in Hong Kong was down 1.5%. The S&P/ASX 200 in Sydney closed down 3.7%.
Sentiment across the globe was hurt by some soft US economic data, which was released last week, and heightened recession fears.
Friday’s weak non-farm payrolls figures added to the concerns sparked by weak manufacturing data on Thursday.
Figures from the US Bureau of Labor Statistics showed nonfarm payrolls rose by 114,000 in July, well below the average monthly gain of 215,000 over the prior 12 months. FXStreet consensus had forecast nonfarm payrolls to increase by 175,000.
Analysts at ING commented: ‘Global risk assets continue to correct sharply as investors fear that the Federal Reserve has left it too late to ease policy. This follows Friday’s soft US jobs data and the now widely cited Sahm rule that points towards a US recession. That data provided a watershed moment for US rates markets, where short-dated US yields collapsed on the view that the Fed would have to slash rates heavily this year.’
In the UK, streets have been hit with riots, hurting the more domestically focussed FTSE 250.
MPs from across the political spectrum have demanded the recall of Parliament in the face of rioting on streets in the UK.
Former home secretary Priti Patel, Labour MPs including Diane Abbott and Dawn Butler, and Reform UK leader Nigel Farage have all called for the Commons to cut short its recess as the country endured another night of violence on Sunday.
But Yvette Cooper, the home secretary, said Parliament would not be recalled ‘right now’.
In more positive news, the UK’s service sector expanded in July, with the end of the general election period helping boost confidence.
The seasonally adjusted services PMI business activity index posted 52.5 in July, a slight increase from June’s 52.1. This was ahead of a flash estimate of 52.4.
S&P said that this signalled a modest but accelerated pace of expansion in output levels across the UK’s service sector. This also marked the first time since April that growth has accelerated.
The composite output index came in at 52.8 points in July, up from 52.3 in June. This was ahead of a flash estimate of 52.7.
The pound was quoted at $1.2753 at midday on Monday in London, lower compared to $1.2803 at the equities close on Friday. The euro stood at $1.0946, higher against $1.0919. Against the yen, the dollar was trading at JP¥142.41, down compared to JP¥146.53.
In the FTSE 100, there were just a handful of companies in the green, with stocks hurt by the global sell-off.
On the other hand, Scottish Mortgage Investment Trust, Pershing Square Holdings, and Melrose Industries sunk to the bottom of the index. They were down 6.8%, 6.9%, and 6.7%, respectively.
Severn Trent and United Utilities lost 4.8% and 4.3%, respectively.
They took a hit as Barclays cut both of their broker ratings.
In the FTSE 250, John Wood lost 38%.
Dar Al-Handasah Consultants Shair & Partners, known as Sidara, said it does not intend to make a firm offer for the Aberdeen, Scotland-based John Wood. Sidara had been given multiple extensions by the UK Takeover Panel to the put-up-or-shut-up deadline to give a firm intention to make an offer, the latest deadline was this coming Friday.
Sidara blamed ‘rising geopolitical risks and financial market uncertainty’ for its ultimate decision to not make a takeover offer.
In response to Sidara’s announcement, John Wood reconfirmed the outlook for the rest of 2024 and for 2025 that it had provided in a trading outlook last month. John Wood had reported growth in earnings, margins and its order book in the first half of the year. It will release its full interim results on August 20.
Clarkson lost 10%.
The London-based shipping and off-shore services provider said pretax profit fell 4.0% to £50.1 million in the six months that ended June 30 from £52.2 million a year before.
Revenue declined 3.4% to £310.1 million from £321.1 million.
Clarkson raised its interim dividend by 6.7% to 32 pence per share from 30p last year, representing the 22nd consecutive year of progressive dividends.
Elsewhere, Guild Esports shares more than doubled, after it has signed a letter of intent with DCB Sports, under which DCB will buy all of the assets of Guild Esports.
London-based Guild is a media company that fields professional players for video gaming competitions. It is backed by footballer David Beckham.
DCB Sports is a California-based investment management company specialising in emerging sports teams and novel leagues. Guild noted that DCB previously led a consortium of investors in the purchase of a Los Angeles-based team in Big3, a 3-vs-3 basketball league founded by hip-hop artist Ice Cube.
Brent oil was quoted at $75.60 a barrel at midday in London on Monday, down from $76.88 late Friday.
Gold was quoted at $2,418.90 an ounce, lower against $2,425.65.
Still to come on Monday’s economic calendar, there are services PMIs for the US.
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