London close: stocks weaken as UK economy contracts in first quarter

London stocks closed in the red on Wednesday after a session where investors pored over the latest UK GDP numbers as well as better-than-expected employment data from across the pond.

The FTSE 100 ended the session down 0.71% to 7,037.47, and the FTSE 250 was 0.74% weaker at 22,376.02.

The pound sterling was in mixed shape, most recently trading 0.22% weaker against the dollar at $ 1.3806 while rising 0.15% against the euro to € 1.1650.

“While the FTSE 100 is only in the red, the Dow started the day up 150 points after a strong personal payroll report,” said I G Chief Market Analyst Chris Beauchamp.

“US stocks have managed to ignore the weak leadership of European markets this morning and are moving forward, bringing clear water between them and warring indices this side of the Atlantic.”

Beauchamp said a better-than-forecast ADP report gave a boost to the Dow, which had found the strength to fill part of its recent performance gap with the S&P 500, with a strong performance from Goldman Sachs and Boeing doing much of the heavy lifting.

“Even with the reminder that today’s ADP number on Friday in no way guarantees a strong payroll outside of agriculture, investors will still be looking for a reasonably good number from official BLS statistics that match today’s number of private payrolls agrees, if only. “To provide confirmation that employment is continuing to recover at a reasonable pace,” said Beauchamp.

“In fact, today’s report still falls into the Goldilocks category as it is moving in the right direction, but not excessively fast, which explains the positive response from US stocks in early trading.”

Data previously released by the Bureau of National Statistics showed that the economy contracted slightly more than originally anticipated in the first quarter as households saved more during the third national lockdown.

Gross domestic product fell 1.6% between January and March, compared to an initial estimate of a 1.5% decline.

That was still 8.8% below pre-pandemic levels, revised from an initial estimate of 8.7%.

The household saving rate rose from 16.1% in the fourth quarter of 2020 to 19.9% ​​in the first quarter of 2021, reaching its second-highest level on record after a rise of 25.9% in the second quarter of last year.

“The minor downward revision of GDP growth in the first quarter is unlikely to prevent the economy from rebounding to its pre-pandemic peak in the coming months,” said Paul Dales, UK chief economist Capital economy.

“And the stronger recovery in the household saving rate increases the potential for faster GDP growth in the future.”

Meanwhile, retail prices fell in June, but inflationary pressures could force retailers to pass higher costs on to consumers soon, the company said British retail consortium.

Prices in stores fell 0.7% yoy in June – faster than in May, when the decline was 0.6%, a BRC / NielsenIQ Poll showed.

The decline was led by the non-food space, which was down 1% in June, compared to an 8% decline in May, the decline reportedly being caused by fashion and other retailers trying to catch the recent rebound in the Extend consumer spending.

“Retailers’ costs continue to rise due to global food price increases, the Brexit bureaucracy, the disruption of the supply chain related to Covid, raw material shortages and increased shipping and gasoline costs,” said Helen Dickinson, who BRC‘s chief executive.

“The increasing cost burden on retailers could be passed on to consumers and, with increasing pressure in the coming months, especially with additional Brexit checks this fall, price increases.”

Finally, in his last speech as chief economist, Andrew Haldane of the Bank of England warned that early afternoon policymakers could lose control of inflation.

At an event of the Institute of Government, said Haldane that UK consumer price inflation was heading to 4% by the end of 2021 and that everyone would lose if inflation expectations were to derail as a result.

He said the old lady would be forced to catch up and raise interest rates “significantly” higher “or faster” in order to re-anchor people’s expectations.

“If this risk were realized, everyone would lose – central banks with missed mandates that would have to pull an economic handbrake, corporations and households with higher costs of credit and living, and governments with rising debt servicing costs,” he said in prepared comments for the speech.

In the stock markets Dixon’s car phone rose 5.94% after reintroducing its dividend as it returned to profitability due to a massive spike in electronics sales online during the Covid lockdown.

Manufacturer used in the treatment of opioid addiction Individual rose 6.4% after the company raised its guidance for 2021 after better-than-expected business performance in the first half of the year.

For the broker note promotion, Workplace was increased by an upgrade to ‘outperform’ atper by 0.66% Erythrocyteswhile on the flip side, Cairn energy was downgraded to Hold at 3.89% Berenberg.

Market movers

FTSE 100 (UKX) 7,037.47 -0.71%
FTSE-250 (MCX) 22,376.02 -0.74%
techMARK (TASX) 4,445.45 -0.29%

FTSE 100 – risers

Compass Group (CPG) 1,522.00p 1.91%
Sainsbury (J) (SBRY) 271.80p 1.12%
Scottish Mortgage Inv Trust (SMT) 1,331.00 p 0.76%
InterContinental Hotels Group (IHG) 4,810.00p 0.54%
Next (NXT) 7,856.00 p 0.43%
Melrose Industries (MRO) 155.10p 0.42%
Land Securities Group (LAND) 675.40p 0.42%
Shareholdings of the Phoenix Group (PHNX) 676.40p 0.39%
Croda International (CRDA) 7,368.00 p 0.35%
Rolls-Royce Holdings (RR.) 98.92p 0.34%

FTSE 100 – Faller

Supervisory authority (PRU) 1,373.50p -3.61%
Evraz (EVR) 592.00p -3.30%
Intermediate Capital Group (ICP) 2,126.00 p -2.97%
Ocado Group (OCDO) 2,003.00p -2.86%
Just Eat Takeaway.Com NV (CDI) (JET) 6,692.00p -2.66%
London Stock Exchange Group (LSEG) 7,970.00p -2.42%
Avast (AVST) 489.80p -2.04%
Taylor Wimpey (TW.) 158.95p -2.03%
Included (ENT) 1,745.50 p -1.94%
Fresnillo (FRES) 771.60p -1.88%

FTSE 250 – risers

Individual (INDV) 154.60p 6.40%
Dixon’s car phone (DC.) 130.20p 5.94%
Morrison (Wm) Supermarkets (MRW) 246.70p 4.53%
Train line (TRN) 293.60p 3.02%
Ultra Electronics Holdings (ULE) 2,290.00 p 2.69%
QinetiQ Group (QQ.) 343.60p 2.69%
Holzgruppe (John) (WG.) 219.70p 2.19%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 481.50p 2.12%
Liontrust Asset Management (LIO) 1,876.00 p 1.62%
Watches of the Switzerland Group (WOSG) 836.00p 1.58%

FTSE 250 – Faller

Chrysalis Investments Limited NPV (CHRY) 247.00p -6.11%
TP Icap Group (TCAP) 195.40p -5.15%
Cineworld Group (CINE) 77.44p -4.68%
Crest Nicholson Holdings (CRST) 419.40p -4.38%
Movement group (FAN) 418.50p -4.01%
Cairn Energy (CNE) 145.70p -3.89%
Head (VPI) 37.31p -3.77%
Tyman (TYMN) 450.00 p -3.64%
Hiscox Limited (DI) (HSX) 831.60p -3.55%
Essentra (ESNT) 309.00p -3.44%