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Friday 23 August 2019

Recession fears and stronger pound spell another day of FTSE losses

The FTSE 100 closed at 7,067.01.

The pound’s gain was the FTSE’s loss on Thursday (PA)
The pound’s gain was the FTSE’s loss on Thursday (PA)

By Alys Key, PA City Reporter

London markets took another battering on Thursday as fears of a recession and a stronger pound pushed shares lower.

The FTSE 100 shed 80.87 points, or 1.13%, to close at 7,067.01.

Multiple factors were weighing on the index, chiefly a gloomy global economic mood after fears were raised that the UK and countries around the world could be heading for a recession.

An inverted yield curve – where short term Government bonds become less attractive than long term ones – in the UK and US has spooked markets.

The FTSE 100’s disproportionately large exposure to the natural resources sector is the reason why it is underperforming against other major European markets David Madden, CMC Markets UK

Energy and mining stocks in particular incurred heavy losses as oil and metal markets dropped on fears that demand would dwindle in a downturn.

A barrel of Brent crude oil was trading 1.24% lower at 58.22 US dollars.

David Madden, market analyst at CMC Markets UK, said: “The FTSE 100’s disproportionately large exposure to the natural resources sector is the reason why it is underperforming against other major European markets.

“Banks are suffering too, but that isn’t a surprise given the compression in the UK Government bond yields, and bank’s profitability is usually hit in lower interest rate environments.”

The German Dax was down 0.7% and the French Cac fell 0.27%.

On top of economic woes, the FTSE was put under pressure by a rising pound.

Sterling got a small boost from resilient retail sales figures, which ticked up 0.2% last month. It was also reacting to news that rebel Conservative MPs have agreed to meet with Jeremy Corbyn in a bid to block a no-deal Brexit.

The currency was up 0.83% on the euro to 1.091 and 0.46% higher versus the US dollar to 1.211.

In company news, Ladbrokes owner GVC pushed its profit forecasts higher as its UK high street stores performed better than expected despite the clampdown on fixed odds betting terminals (FOBTs).

Ladbrokes stores performed better than expected (Ian West/PA)

But shares slipped by 1.6p to 545.2p.

Transport giant FirstGroup appointed the former boss of rival Arriva as its new chairman as the group looks to move on from its spat with activist investor Coast Capital.

Investors were cheered by the news, with shares up 7.3p to 121.9p.

Luxembourg-based ICAMAP upped its stake in easyHotel from 38.65% to 44.09%, amid its efforts to take control of the group.

EasyHotel shares were flat, having already surged earlier in the month when the initial offer was made.

Royal Bank of Scotland saw shares plummet 20.8p to 177.65p on Thursday after two key brokers lowered their forecasts for the public-owned bank.

Paving slab supplier Marshalls said it was “outperforming” the construction sector after posting double-figure revenue and profit growth in the first half of 2019.

Shares inched 1.5p higher to 616.5p.

The biggest risers on the FTSE 100 were United Utilities Group up 15p to 789.2p, British American Tobacco up 41p to 3,049.5p, National Grid up 8.2p to 851p and Micro Focus International up 10.6p to 1,568.6p.

The biggest fallers on the FTSE 100 were Royal Bank of Scotland Group down 20.8p to 177.65p, Just Eat down 48.2p to 760.6p, Phoenix Group down 37.7p to 641p and Evraz down 28.5p to 498.9p.

PA Media

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