Stocks in London continued on their losing streak on Wednesday, as risk appetite was curbed by the upcoming UK budget, and the US presidential election.
The FTSE 100 index closed down 47.90 points, or 0.6%, at 8,258.64. The FTSE 250 ended down 119.72 points, or 0.6%, at 20,829.93, and the AIM All-Share lost 5.03 points, 0.7%, at 729.13.
The Cboe UK 100 closed down 0.6% at 826.94 on Wednesday, the Cboe UK 250 ended down 0.7% at 18,399.06, and the Cboe Small Companies fell 0.6% at 16,768.80.
Barclays expects Chancellor Rachel Reeves to raise taxes by £35 billion by 2029 to 2030 and sees public spending increases of £57 billion by 2029 to 2030.
Borrowing is expected to rise by £20 billion in fiscal 2024 to 2025, and in subsequent years by an average of £22 billion.
‘We expect the October budget to be net growth positive relative to March and could potentially add 0.3 to 0.4 percentage points to near-term growth given our expectations.’
Supporting the need for growth, International Monetary Fund official Vitor Gaspar told reporters in Washington that Britain ‘is living with interest rates that are close to US interest rates, but it is also living with growth rates that are not close to US growth rates’.
‘Public investment is badly needed.’
In European equities on Wednesday, the CAC 40 in Paris closed down 0.5% while Frankfurt’s DAX 40 ended down 0.2%.
In New York, the Dow Jones Industrial Average was down 0.8%, the S&P 500 was 0.7% lower and the Nasdaq Composite slid 1.0%.
‘This week’s stock market price action suggests that the 50th record high for the S&P 500 could be a tough ask with the US election so close,’ commented Kathleen Brooks at XTB.
A swathe of earnings also provided direction, with numbers from Boeing and Coca-Cola amongst others, while Tesla becomes first of the ’Magnificent Seven’ to release third quarter results after the closing bell.
Investors will be looking to ‘see if Elon Musk can sell a more convincing story about Tesla’s future plans for growth compared to previous earnings reports,’ Brooks added.
McDonald’s faltered, down 4.6%, after US health officials said one person died and dozens became sick following a severe E. coli outbreak linked to McDonald’s quarter pounder hamburgers.
The chain said it was temporarily removing the item from restaurants in some states. Most of the 49 cases are concentrated in Colorado and Nebraska, according to the US Centers for Disease Control & Prevention.
Also weighing on Wall Street, sales of previously built homes in the US declined to the lowest level in 14 years in September.
Existing home sales decreased 1% on a monthly basis in September to a seasonally adjusted annual rate of about 3.84 million, the National Association of Realtors said. That fell below analysts’ forecasts for an annual rate of about 3.86 million.
With US polls narrowing the dollar gained strength lifted by the so-called ’Trump trade’.
‘With 2 weeks to go before the US election, it is hard to see the dollar fall in a meaningful way ahead of this event,’ Brooks remarked.
The pound was quoted at $1.2938 late Wednesday afternoon in London, down compared to $1.2973 at the equities close on Tuesday. The euro stood at $1.0780, lower against $1.0808. Against the yen, the dollar was trading at JP¥152.83, up compared to JP¥151.06.
On London’s FTSE 100, Reckitt Benckiser rose 4.0% after third quarter sales reassured the City, although analysts suggested the ongoing strategic revamp and litigation challenges could limit share price progress.
‘Third quarter numbers were in line with or slightly above our and consensus expectations, with guidance reiterated. Given recent operational volatility at Reckitt, and the mixed performances elsewhere this results season, we think this is good enough. The focus near term is likely to remain strategic transformation and litigation,’ analysts at Barclays commented.
The consumer goods firm, with brands such as Air Wick and Dettol in its stable, said net revenue in the third quarter fell 4.0% on-year to £3.46 billion. On a like-for-like basis, it weakened 0.5%.
WPP climbed 6.1% after reporting third-quarter revenue growth alongside improved billing figures with management encouraged by the firm’s progress.
The third quarter saw revenue for the FTSE 100-listed advertising company increase 1.4% to £3.56 billion from a year prior, climbing 4.1% like-for-like. Revenue less pass-through costs declined 2.6% on-year to £2.77 billion, but rose 0.5% on a like-for-like basis. Full year guidance for the firm remains unchanged.
Edison Research analyst Fiona Orford-Williams noted that ‘the overall mood music is sounding more positive’ but drew attention to the ‘the proviso that the fourth-quarter will be against a tougher comparative period and against continuing macroeconomic uncertainty’.
Barratt Redrow rose 2.5%. It said it is ‘beginning to see more stable market conditions’ in the housebuilding sector.
The company, now in an ‘exciting new chapter’ with the tie-up of Barratt Developments and Redrow now in force, warned it may still take some time for consumer confidence to recover.
‘Long-term housing market fundamentals continue to reflect a significant imbalance between housing supply and demand. The new government has demonstrated that it is committed to improving the planning system and addressing funding challenges in the affordable housing sector. Whilst these supply-side reforms will also take some time to be fully implemented, we are confident that they will help to unlock permissioned land supply and the delivery of more high-quality, sustainable homes across the country,’ the company said.
Mulberry eased 3.5% after Frasers Group said it does not intend to make a takeover offer for the Somerset-based handbag maker.
On Tuesday, Mulberry had dismissed a sweetened approach from the Sports Direct owner, labelling it ‘untenable’.
Gold retreated from recent highs with the yellow metal quoted at $2,718.02 an ounce, down against $2,739.35.
Brent oil was quoted at $75.06 a barrel on Wednesday, down from $75.86 late Tuesday.
Thursday’s economic calendar sees a raft of composite PMI readings, US new homes sales data and US weekly jobless claims.
In the local corporate calendar, trading statements are due from miner Anglo American, high street lender Barclays, Marmite owner Unilever and exchange operator and data provider London Stock Exchange Group.
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