UK stock selling accelerates as recession risks spook global investors

June ended on a negative note for equities in London on Thursday, as worries about rising interest rates, spiraling inflation and the potential for a recession loomed large.

The FTSE 100 index closed down 143.04 points, or 2.0%, at 7,169.28 on Thursday. The index lost 5.8% in June.

The FTSE 250 ended down 372.01 points, or 2.0%, at 18,666.78 and the AIM All-Share closed down 17.10 points, or 1.9%, at 876, 22.

The Cboe UK 100 ended down 1.9% at 715.20, the Cboe UK 250 closed down 2.0% at 16,305.91 and the Cboe Small Companies ended down 1.4% at 13,275.51.

In European stocks on Thursday, the CAC 40 in Paris ended down 1.8%, while the DAX 40 in Frankfurt ended down 1.7%.

Data in recent days has been mixed as investors assess recession risks.

Thursday’s figures showed Britain’s economy grew at the same pace as previously estimated. On an annual basis, UK gross domestic product grew 8.7% unchanged in the first quarter, accelerating from growth of 6.6% in the last quarter of 2021.

On a quarterly basis, the UK economy recorded unrevised growth of 0.8% in the first quarter, slowing from a 1.3% expansion in the fourth quarter.

Governor Andrew Bailey said on Wednesday that Britain’s economy is likely to weaken sooner and be more intense than others due to the energy price shock that all European economies are facing.

The situation has been further exacerbated in Britain by the “structural legacy” left by Covid on the labor market as businesses struggled with a shortage of workers.

At first glance, Thursday’s US inflation data is encouraging. According to the Bureau of Economic Analysis, the basic personal consumption expenditure index, which excludes food and energy, rose 4.7% annually in May, slowing from a 4.9% rise. in April. The May figure was in line with a consensus forecast – quoted by FXStreet.

The base PCE reading is the US Federal Reserve’s preferred inflationary gauge.

However, ING said the activity front “is not pleasant to watch”, noting that real consumer spending fell 0.4% month-on-month.

“The decline in core inflation is encouraging, but at 4.7% it is still more than double the 2% target…Consumer confidence is already fragile as the housing market falters. crunches, and with more interest rate hikes to come and the Compression of purchasing power by gasoline prices is unlikely to ease anytime soon, the outlook for consumer spending in the second half are deteriorating. There is a very clear threat that the prospect of a recession is a late 2022 rather than early 2023 scenario,” ING said.

Stocks in New York were down at the London stocks close, with the DJIA down 1.1%, the S&P 500 index down 1.1% and the Nasdaq Composite down 1.3% .

The dollar strengthened amid Thursday’s risk-averse mood.

The pound was listed at $1.2157 at London shares’ close on Thursday, down from $1.2191 at Wednesday’s close. The euro stood at $1.0456 at the close of European stocks on Thursday, down from $1.0531 at the same time on Wednesday.

Against the safe haven Japanese yen, however, the dollar was trading at JP¥135.89, down from JP¥136.22 on Wednesday night.

In London, miner Anglo American was the worst performer on the FTSE 100, down 5.3%. Mining stocks were pressured by worries about the global slowdown, having failed to get a boost from data showing Chinese factory activity picked up in June.

The manufacturing PMI rose to 50.2 points in June, in line with analysts’ expectations, from 49.6 in May. Any reading above the 50.0 mark without change indicates growth.

Despite this, mining stocks such as Rio Tinto, Glencore and Antofagasta closed down 3.6%, 3.3% and 1.5% respectively.

Towards the top of the FTSE 100 was Bunzl, up 1.8% after lifting the annual forecast. The company said it expects to achieve “very strong” growth in the six months to June 30.

Bunzl said first-half revenue is expected to grow 16% year-on-year at real exchange rates and 12% to 13% at constant exchange rates as inflation continues to drive underlying revenue growth and growth. acquisitions complementing the progress as well.

Bunzl updated its guidance for the year based on strong revenue growth to date and announced acquisitions, although no actual numbers were provided.

At constant exchange rates, Bunzl now expects “very good” revenue growth in 2022, driven by good organic revenue growth and the positive contribution from acquisitions. Bunzl previously expected a “moderate” annual revenue growth.

In the FTSE 250, Aston Martin fell 8.0% after industry publication Autocar reported the automaker was seeking to raise funds to secure its future.

In response to the share decline, Aston Martin said it regularly reviews its financing options and any financing options would be aimed at supporting and accelerating its future growth.

Aston Martin assured that it continues to trade in line with expectations for 2022. The company reaffirmed its financial guidance for the year, anticipating an 8% increase in base volumes and a 50% improvement in adjusted base profit before interest, taxes, amortization, and amortization.

The workspace fell 8.9% after Bank of America cut the stock from “underperforming” to “neutral.”

Elsewhere, shares of Hunting plunged 21%, although the energy services provider expects to return to full-year net profitability after a performance in line with expectations in the first half.

Interim earnings before interest, taxes, depreciation and amortization are expected to be between $16 million and $18 million. The previous year, the company recorded an Ebitda loss of $3.6 million.

“A booming order book, a recovery in U.S. activity and management’s expectation of a return to net profit in 2022 are not proving sufficient to support Hunting’s stock as financial markets continue to worry about a recession and a possible drop in demand for oil,” said AJ Bell chief investment officer Russ Mould.

Brent oil was quoted at $114.74 a barrel at the close of London stocks on Thursday, down from $117.21 on Wednesday night.

Gold was listed at $1,807.91 an ounce at the close of London stocks on Thursday, down from $1,820.14 at the close on Wednesday.

Friday’s economic calendar has unemployment in Japan and a manufacturing PMI overnight, as well as manufacturing PMIs from Ireland and China. Later in the morning, manufacturing PMIs from Germany at 0855 BST, Eurozone at 0900 BST and UK at 0930 BST.

There is Eurozone inflation at 1000 BST and US PMI at 1445 BST and 1500 BST.

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Date of issue: June 30, 2022