(Alliance News) - London stocks continued to trade in the red at midday on Thursday, plagued by worries that the UK economy could slip into a recession following a downbeat services PMI.
The FTSE 100 index was down 35.68 points, or 0.5%, at 7,086.86 Thursday midday, with the index now down around 4.6% for the week. On Wednesday, the index had plummeted 3.2%.
The FTSE 250 was down 83.45 points, or 0.4%, at 19,393.46. The AIM All-Share was down 0.9% at 858.83.
The Cboe UK 100 index was down 0.6% at 12,024.12. The Cboe UK 250 was 0.6% lower at 17,327.80 and the Cboe UK Small Companies down 0.1% at 10,863.54.
"The FTSE 100 is back in the red today, as fears over the global growth picture and a tit-for-tit trade war between the US and EU continue to dent sentiment. The huge losses seen yesterday have eased somewhat in Europe, with traders taking stock after a huge slump in global markets," said Joshua Mahony, senior market analyst at IG.
"However, fears over US growth prospects have been joined by the UK, with the contraction in UK services pointing towards a growing fear for UK Q3 growth figures," he added.
Data from IHS Markit earlier on Thursday showed the UK services sector slipped into decline in September as firms postponed orders due to Brexit uncertainty, with the country now at "heightened risk" of a recession.
The seasonally adjusted IHS Markit/CIPS services purchasing managers' index slipped to 49.5 in September from 50.6 in August, indicating the sector contracted last month. Any reading over 50 signals expansion in a sector, while one below shrinkage.
"A trio of grim reports on the economy means that the vast service sector has now joined manufacturing and construction in decline," said Chris Williamson, chief business economist at IHS Markit.
"At current levels the surveys point to GDP falling by 0.1% in the third quarter which, coming on the heels of a decline in the second quarter, would mean the UK is facing a heightened risk of recession," he added.
Samuel Tomb, chief UK economist at Pantheon Macroeconomics, said that the survey at face value indicates the economy has ground to a halt. However, the services survey has been "far too downbeat" over the last year, he added.
"We see no reason why the PMI, or other business surveys, suddenly would be on the money now, having misled for the last year. Accordingly, we continue to expect GDP to rise by 0.3% on a quarter-on-quarter basis in the third quarter and for the Monetary Policy Committee to hold back from cutting interest rates, provided that a no-deal Brexit is avoided," said Tombs.
The pound was quoted at USD1.2289 at midday, soft versus USD1.2300 late Wednesday.
The eurozone also saw its services PMI slip in September, down to 50.1 points from 53.5 in August, and lagging the 52.0 flash estimate for September.
In European powerhouse Germany, the composite PMI sank to a nearly seven-year low of 48.5 points in September from 51.7 in August. The services PMI reading in the country was 51.4 in September, down from 52.5 in August.
To come on Thursday, there is a US services PMI at 1445 BST and an ISM non-manufacturing PMI at 1500 BST.
In mainland Europe, the CAC 40 in Paris was up 0.7% in early afternoon trade. Markets in Germany are closed for the Day of Unity holiday.
In the US, stocks are pointed to a slightly higher start with the Dow Jones and S&P 500 called up 0.4% and the Nasdaq on course to rise 0.5%.
Weighing on the FTSE 100 on Thursday were a number of ex-dividend stocks, including packaging firm DS Smith, down 5.1%, retailer Kingfisher, down 4.0%, and cigarette maker British American Tobacco, down 3.3%.
In the FTSE 250, Finablr was up 3.3% after launching a Money Transfer feature in Samsung Pay with Samsung Electronics America.
Money Transfer in Samsung Pay - a digital wallet service - is available now in the US and will be expanded to further markets in 2020, Finablr said. This new in-app international money transfer service offers users seamless and secure cross-border payments to 47 countries through a variety of payout methods, the partners highlighted.
At the bottom of the index was Centamin, down 12% after news long-serving Chief Executive Andrew Pardey intends to retire.
Turning to third-quarter production, Centamin previously had reported that it was behind expectations, primarily due to reduced open pit mining rates on the higher-grade stage 4 west wall.
On Thursday, the company said it expects total gold production for the three months to the end of September to be between 97,000 and 98,000 ounces, bringing production for the first nine months of 2019 to between 331,000 and 332,000 ounces.
Elsewhere on the London Stock Exchange, shares in Ted Baker dropped 36% after the clothing retailer warned on its annual outcome.
In the six months to August 10, revenue slipped 0.7% year-on-year to GBP303.8 million from GBP306.0 million and Ted Baker slumped to a pretax loss of GBP23.0 million from a GBP24.5 million profit, on higher costs and exceptional items.
The first half performance was below expectations, Ted Baker conceded, and second half trading has also "started slowly". Full-year results will be below last year if this trend continues, the company noted.
"Ted's future fortunes lie in its ability to get its cost base under control. Sales performance hasn't been too bad, so there's clearly demand for what Ted is selling, just not necessarily at the price it needs them to be. Only time will tell if Ted can find a way to rejig its offering in a profitable way, at the moment that looks to be some way off," said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.
By Lucy Heming; lucyheming@alliancenews.com
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