London's FTSE 100 ended lower on Thursday, while the pound was put under more pressure, after Fitch lowered its UK credit rating outlook to 'negative' from 'stable'.
Sterling is still dealing with the fallout of UK Chancellor Kwasi Kwarteng's 'mini-budget' a fortnight ago. The UK government is still fighting to shore up investor confidence in the fiscal measures.
The FTSE 100 index closed down 55.35 points, or 0.8% at 6,997.27. The FTSE 250 ended down 70.22 points, or 0.4%, at 17,632.64. The AIM All-Share closed up just 0.76 of a point, or 0.1% at 816.20.
The Cboe UK 100 ended down 0.7% at 699.09, the Cboe UK 250 closed up 0.3% at 15,029.74, and the Cboe Small Companies ended down 0.6% at 12,215.97.
‘The large and unfunded fiscal package announced as part of the new government's growth plan could lead to a significant increase in fiscal deficits over the medium term,’ Fitch said in a statement.
Truss on Wednesday vowed to steer Britain towards growth as she closed the Conservative party's annual conference, her first as leader.
She argued in her speech that the status quo was not an option as she hit out at the ‘anti-growth coalition’. The speech came despite the botched rollout of her fiscal plan which led to a humiliating U-turn on a pledge to cut income tax for the highest earners.
The pound was quoted at $1.1191 at the London equities close Thursday, down from $1.1252 at the close on Wednesday.
Elsewhere, IMF chief Kristalina Georgieva urged policymakers around the world on Thursday to take concerted action to avoid a ‘dangerous 'new normal,'’ as the risks of a worldwide recession are driven ever higher by repeated economic shocks.
In a speech ahead of the fund's annual meetings next week, the IMF's managing director said it was vital to ‘stabilize the global economy by addressing the most immediate challenges’ - including rampant inflation.
Policymakers need to act together to ‘prevent this period of heightened fragility from becoming a dangerous 'new normal,'’ Georgieva said.
But she cautioned the process would be painful - and that if central banks move too aggressively to tamp down price pressures, it could trigger a ‘prolonged’ economic downturn.
However, Georgieva said central banks must ‘stay the course’ in their battle against rising inflation, even amid the growing risks of recession worldwide.
Inflation is ‘still stubborn, still persistent,’ Georgieva told AFP in an interview.
‘The risk of doing not enough is bigger than the risk of doing too much,’ she said.
In the FTSE 100, Imperial Brands closed as the best blue-chip performer, climbing 3.5%.
The tobacco firm announced a £1 billion share buyback programme, and said including dividends, annual capital returns are expected to exceed £2.3 billion - about 13% of its current market capitalisation, it noted.
Imperial Brands also said trading in its financial year ended September 30 was in line with expectations. Looking ahead, it expects net revenue and adjusted operating profit to grow by around 1% in constant currency, in line with previous guidance.
Shell slid 2.6% as it warned that a fall in indicative refining margins will cost it at least $1.0 billion.
The London-based oil and gas major said it expects an indicative refining margin of $15 per barrel, down 46% from $28 in the second quarter of 2022.
This will have a negative impact for Products of around $1.0 billion to $1.4 billion on third quarter adjusted earnings before interest, tax, depreciation and amortisation, Shell cautioned.
It also warned trading and optimisation results for Integrated Gas will be ‘significantly lower’ compared to the second quarter of this year.
The firm explained this was the ‘result of seasonality and substantial differences between paper and physical realisation in a volatile and dislocated market.’
In the FTSE 250, Ferrexpo fell 3.9% as it continued to navigate the impact of Russia's invasion of Ukraine.
The Swiss mining firm said that iron ore pellet production for the third quarter of 2022 was 839,000 tonnes, a decrease of 68% year-on-year due to the invasion.
Ferrexpo said it was operating with one out of four pelletiser lines as the war put more constraints on logistics.
Sales decreased by 65% year-on-year to 1.0 million tonnes in the third quarter of 2022 reflecting the same constraints. As a result, the company pivoted towards higher grade direct reduction pellets.
Volution surged 8.3% as it reported double-digit rises in annual revenue and profit and lifted its dividend by 16%.
For the year that ended on July 31, revenue rose 13% year-on-year to £307.7 million from £272.6 million, as pretax profit increased to £47.2 million, up 57% from £30.0 million a year before.
The Crawley-based manufacturer of energy-efficient indoor air quality products also declared a total dividend of 7.3 pence, up from 6.3p a year prior.
Elsewhere, Motorpoint plunged 17%. For the six months ended September 30, the Derby-based omnichannel vehicle retailer expects pretax profit of around £3 million, a significant decrease from £13.5 million a year prior.
Motorpoint said that this decline reflected additional costs, including an increased strategic investment of around £4 million, and interest costs of around £1.0 million. It also said numbers for the first half suffered in comparison to the ‘record margins’ of last year.
In European equities on Wednesday, the CAC 40 in Paris closed down 0.8%, while the DAX 40 in Frankfurt down 0.4%.
The euro stood at $0.9837 at the European equities close Thursday, down against $0.9859 at the same time on Wednesday.
Against the yen, the dollar was trading at JP¥144.81 late Thursday, a touch higher compared to JP¥144.78 late Wednesday.
Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 0.7%, the S&P 500 index down 0.6%, and the Nasdaq Composite 0.4% lower.
New unemployment claims in the US grew last week, coming in ahead of expectations, figures on Thursday showed.
According to the Department of Labor, initial jobless claims rose to 219,000 in the week ended October 1, from a downwardly revised 190,000 seven days earlier. The previous week's figure was initially reported at 193,000.
The latest number came in ahead of FXStreet cited consensus of 200,000. It was the largest figure since the end of August.
The jobless claims data comes ahead of Friday's nonfarm payrolls report. A hotter-than-expected employment growth may strengthen the Federal Reserve's case for another hefty rate hike. It has lifted rates by 75 basis points in its previous three meetings.
The jobs data is reported at 1330 BST. Elsewhere on the economic calendar, there is a German retail sales reading at 0700 BST.
Brent oil was quoted at $94.30 a barrel at the London equities close Thursday, up from $93.34 late Wednesday.
Gold was quoted at $1,712.13 an ounce at the London equities close Thursday, higher against $1,709.08 at the close on Wednesday.
Friday's local corporate calendar has annual results from pub firm JD Wetherspoon and retailer Superdry. Ten pin bowling company Hollywood Bowl releases a trading statement.
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