Sentiments soured in London on Wednesday as the UK took a step closer to recession and the Bank of England warned it would pull its bond-buying safety net on Friday as planned.
The FTSE 100 index closed down 59.08 points, 0.9%, at 6,826.15. The FTSE 250 ended down 292.90 points, 1.7%, at 16,611.16, and the AIM All-Share closed down 11.43 points, 1.5%, at 776.27.
The Cboe UK 100 ended down 0.9% at 681.94, the Cboe UK 250 closed down 2.0% at 14,231.10, and the Cboe Small Companies ended down 1.7% at 12,308.79.
In European equities on Wednesday, the CAC 40 in Paris ended down 0.3%, while the DAX 40 in Frankfurt ended down 0.4%.
The UK economy faced yet more turmoil, with economic data painting a fairly gloomy picture.
The nation's trade deficit widened, its industrial production shrunk and its gross domestic product also weakened.
Figures showed the UK economy shrank by 0.3% in August from July, following a downwardly revised 0.1% climb in July from June. Month-on-month growth in July was initially forecast at 0.2%.
August's gross domestic product was expected to have remained unchanged from July.
‘While July's economic health was bolstered by a number of sporting events that got people out and about, August was coloured with caution. Households were terrified about what the winter ahead had in store, as they read headlines predicting horrific energy bills, and witnessed first-hand as inflation squeezed their spending power,’ said AJ Bell's Danni Hewson.
‘Rising prices, falling confidence and cooling temperatures seem to be the perfect recipe for recession and there's every indication that in September the economy will have followed August's path, helped along by a bank holiday detour.’
The pound was quoted at $1.1066 at the London equities close Wednesday, down compared to $1.1097 at the close on Tuesday. It had hit a two-week low of $1.0924 earlier in the day.
Sterling saw a turbulent day of trading, following some mixed messages from the Bank of England.
BoE Governor Andrew Bailey confirmed late Tuesday that the emergency interventions would halt this week, but on Wednesday morning, the Financial Times reported the bank had privately signalled it was considering extending the bond-buying programme beyond the Friday deadline.
Later in the day, the bank confirmed the scheme would end on Friday.
‘This back-and-forth jostling and inconsistent messaging is becoming an unwanted trend, leaving investors scratching their heads, wondering what’s going on. It may only get worse in the coming weeks leading up to Kwasi Kwarteng's debt-cutting plan on 31 October,’ said AJ Bell investment director, Russ Mould.
The euro stood at $0.9702 at the European equities close Wednesday, down against $0.9719 at the same time on Tuesday.
Against the yen, the dollar was trading at JP¥146.90, sharply higher compared to JP¥145.70 late Tuesday.
Meanwhile, producer inflation heated up in the US. Producer prices increased in September, data from the Bureau of Labor Statistics showed, reversing from August's decline and exceeding market expectations.
The producer price index increased 0.4% in September from the previous month, partially reversing declines of 0.2% in August and 0.4% in July.
Market consensus, according to FX Street, had predicted a 0.2% rise.
Investors will have a keen eye on Thursday's US consumer price inflation figures, which will be a key factor in determining the US Federal Reserve's interest rate decision next month.
Stocks in New York were higher at the London equities close, with the DJIA up 0.5%, the S&P 500 index 0.2%, and the Nasdaq Composite up 0.2%.
In the FTSE 100, AstraZeneca edged up 1.1% on ‘exceptional data’ for its drug Ultomiris. Towards the end of this month, AZ's subsidiary Alexion Pharmaceuticals will present data showing ‘significant advances’ for the treatment of a form of neuromyelitis.
At the other end of the index was JD Sports, which lost 9.7%. After some high-profile changes to its once controversial leadership in recent months, the athleisure retailer announced its Chief Financial Officer Neil Greenlagh will step down next year.
JD will now begin the process of recruiting his successor.
Another poor blue chip performer was Barratt Homes, falling 5.0%. The housebuilder warned private reservations are down from a year earlier, as the sector battles a tough economic climate.
‘Barratt cites increased wider economic uncertainty thanks to the knock to consumers' confidence and pockets from the increased cost of living, higher interest rates and also a reduction in mortgage availability. All three factors bear the fingerprints of both the government and the Bank of England and the drop in mortgage availability is a direct result of the financial market fall-out which followed the chancellor's botched fiscal event of 23 September,’ said AJ Bell's Mould.
In a negative read-across fellow housebuilders Persimmon and Crest Nicholson lost 5.8% and 6.6% respectively
In the midcaps, Marks & Spencer lost 4.8%. In a presentation to investors, the grocer said it is accelerating a major shake-up of its stores estate, and will close 67 more shops.
M&S stressed that the previously announced closures will be more than offset by new openings as the group seeks to focus more on its grocery business and online operations.
On AIM, environmental and life science group Deepverge plunged 45%.
The Dublin-based artificial intelligence tech firm warned it may not be able to raise ‘sufficient equity funds’ as repayments for a loan fall due.
It secured a £25 million loan in March, of which an initial £4 million was drawn. The firm stated that monthly repayments begin on Sunday, with an initial £500,000 due.
DeepVerge added there will be no default on the loan despite any missed payments up to November 14, assuming principal and interest payments are made following a proposed equity raise.
Brent oil was quoted at $92.55 a barrel at the London equities close Wednesday down from $94.62 late Tuesday. Gold was quoted at $1,670.16 an ounce, down slightly against $1,671.20 at the close on Tuesday.
In Thursday's UK corporate calendar, there are trading statements from budget airline easyJet, gambling firm Entain, and recruitment firm Hays.
As well as US CPI and intial jobless claims at 1330 BST, the economic calendar for Thursday has German CPI at 0700 BST, and Ireland CPI at 1100 BST. There will also be remarks from BoE Monetary Policy Committee Member Catherine Mann.
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