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(Alliance News) - Stocks in London ended in the red for the fourth consecutive session on Thursday following weak economic data from the UK, Europe and US, heightening fears of a global recession.
The FTSE 100 index closed down 44.90 points, or 0.6%, at 7,077.64. The large cap index fell to an intraday low of 7,004.43 in late afternoon trade.
The FTSE 250 ended down 128.75 points, or 0.7%, at 19,348.16, and the AIM All-Share closed down 8.20 points, or 1.0%, at 858.28.
The Cboe UK 100 ended down 0.7% at 12,010.31, the Cboe UK 250 closed down 0.8% at 17,292.92, and the Cboe Small Companies ended down 0.4% at 10,836.02.
"The FTSE 100 is underperforming its continental counterparts as major declines in commodity stocks are weighing on the index. The London market has a relatively large exposure to energy as well as mining stocks, so the concerns about a global slowdown are hitting the FTSE 100 extra hard. Consumer stocks are under pressure too as the latest UK services data showed a contraction in September, and that suggests that consumers are curtailing their spending ahead of Brexit. Sterling is relatively strong today, which is impacting the FTSE 100 too," said CMC Markets analyst David Madden.
The pound was quoted at USD1.2410 at the London equities close, up from USD1.2300 at the close Wednesday, amid dollar weakness.
The UK is facing a heightened risk of recession after Brexit uncertainty saw activity in the dominant services sector slam into reverse last month, according to a report from IHS Markit.
The closely-watched IHS Markit/CIPS UK services purchasing managers' index showed a worse-than-expected reading of 49.5 in September, down from 50.6 in August. The figure fell below the 50.0 mark that separates expansion from contraction.
It marks the first contraction since March and only the fifth in more than a decade.
"UK PMI services report dipped below the 50 boom/bust line suggesting that the economy is headed for the recession, but cable ignored the news as markets focused on possible progress on Brexit talks," BK Asset Management's Boris Schlossberg said.
"Typically, markets would have taken sterling lower on such dour news, but markets are much more focused on the Brexit negotiations and on that front there appeared to be a scintilla of progress as Irish officials did not completely reject PM Johnson's new proposals for customs arrangements on the Northern Ireland border," Schlossberg added.
On the political front, UK Prime Minister Boris Johnson has told MPs he has made a "genuine attempt to bridge the chasm" with the EU by making compromises to strike a fresh Brexit deal.
The prime minister told the Commons his proposals do not deliver all his departure desires but insisted they are better options than to "remain a prisoner" of the current situation.
But he acknowledged in his statement a day after he shared his proposals with Brussels that they are "some way from a resolution".
Johnson urged MPs to "come together in the national interest behind this new deal", but first he must get it passed by the EU, with reactions from European leaders so far being cool.
The government on Wednesday submitted its proposal for a new withdrawal agreement from the EU to back up Johnson's vow to pull his country out of the bloc on October 31.
While the EU has cautiously said the document contained some progress on the sticking point of Northern Ireland it also had problems.
Berenberg's Holger Schmieding said: "We expect a flurry of negotiations in coming days. Acutely aware of the blame game risks, the EU will continue to talk and explain its position, sticking to its line of 'progress, but the UK needs to shift its position further'. Whether or not the UK will do so remains the key question. Given the expectations which Johnson has raised among Brexit hardliners and his very precarious position in the UK parliament, that does not seem likely.
"As it stands, we probably have to brace ourselves for another Brexit extension to be followed by either new elections in the UK in late 2019 (more likely) or a new referendum in spring 2020 (possible but less likely). For a second referendum, the UK opposition would have to get its act together, topple Johnson and install an interim prime minister to serve until after such a 'deal or remain' referendum."
On the London Stock Exchange, ex-dividend stocks weighed on the FTSE 100.
DS Smith closed down 5.7%, Kingfisher down 3.5%, British American Tobacco down 3.7% and Taylor Wimpey down 3.2%. The stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.
In the FTSE 250, Finablr closed up 3.3%. The cross-border payments group and Samsung Electronics America launched the Money Transfer feature in Samsung Pay.
Samsung Electronics America is a subsidiary of Samsung Electronics Co, a South Korean TVs, smartphones, tablets, laptops and home appliances manufacturer. 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 other end of the midcaps, Centamin ended the worst performer, down 9.9% after the gold miner said long-serving Chief Executive Andrew Pardey intends to retire. The Nomination Committee, chaired by Edward Haslam, is initiating a search process to find a new CEO.
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. Centamin 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.
Despite the doom-and-gloom surrounding UK equity markets, analysts at Citi believe it is too early for investors to become cautious.
"Brexit concerns weigh on the UK market. However, 70% of FTSE 100 revenues come from overseas. UK plc’s profits are more sensitive to global GDP and the oil price than they are to domestic GDP. We can find many UK-listed stocks which generate most of their profits in the US, but trade on a discount to their US-listed peers. Other markets look as cheap, but greater shareholder accountability means that UK companies are more likely to respond to their derating, perhaps through share buybacks, de-listings or spin-offs. The UK is now our favourite value trade," Citi analysts said.
In European equities, the CAC 40 in Paris ended up 0.3%. Markets in Germany were closed for the Day of Unity holiday.
On the continent, the European Union is considering its next move after the US announced it would slap additional tariffs on EU exports over illegal subsidies for Airbus, with an EU executive spokesman saying the bloc "regrets" the US' decision.
However, the US said it expects to enter into negotiations with the bloc to resolve the spat over state subsidies for aircraft manufacturers Airbus and Boeing, European Commission trade spokesman Daniel Rosario noted in Brussels.
World Trade Organization awarded Washington the right to apply up to USD7.5 billion worth of countermeasures for illegal EU subsidies for Airbus in a Wednesday ruling. Shortly after, the US announced it would apply tariffs later this month.
But the EU has a parallel case against US subsidies for the aircraft maker Boeing working its way through the WTO's arbitration system.
The WTO has found that both sides have committed subsidy sins, and the EU also expects it will be granted permission to apply sanctions worth several billions of dollars once WTO arbitrators make a decision in a few months time.
The EU has always wanted a negotiated settlement, Rosario added, but said the bloc could hit back, and drew attention to the list of possible targets for retaliatory tariffs drawn up by the bloc last April.
The euro stood at USD1.0985 at the European equities close, higher than USD1.0951 late Wednesday.
In economic news from the continent, eurozone private sector growth continued to stagnate in September, as service sector growth slowed sharply and the woes in Germany deepened, according to IHS Markit.
The IHS Markit eurozone composite purchasing managers' index sank to 50.1 points in September from 51.9 points in August. The final September print also represented a deterioration on the flash reading of 50.4 points.
The weakness in the September print was driven by the services sector. The eurozone services PMI in September read 50.1 points - down from 53.5 in August - and lagging the 52.0 flash estimate for September.
Stocks in New York were lower at the London equities close following disappointing US economic data.
The DJIA was down 0.5%, the S&P 500 index down 0.3% and the Nasdaq Composite down 0.3%.
The Institute for Supply Management said its latest non-manufacturing purchasing managers' index dropped to 52.6 in September from 56.4 in August. The reading fell short of the market expectation of 55.0.
"The doom and gloom that started with manufacturing appears to be starting to show signs of creeping into the service sector. The ISM report triggered a new wave of risk aversion with both US stocks and the dollar extending their declines on the week," said OANDA markets analyst Edward Moya.
"While the service sector is still adding jobs, it is very apparent that we are no longer adding jobs at a strong pace and we will likely see further weakness in the service sector have a strong ripple effect in the coming months. With slowdown expectations firmly in place many will expect the Federal Rserve to respond with an easing cycle to stop the growing risks of a recession. Rate cut won't be enough, the QE debate will likely begin in the coming meetings," Moya added.
Brent oil was quoted at USD56.82 a barrel at the London equities close, down from USD57.97 at the close Wednesday.
Gold was quoted at USD1,514.80 an ounce at the London equities close, higher than USD1,501.40 late Wednesday.
The economic events calendar on Friday has the US jobs report for September at 1330 BST. Financial markets in China remain closed for 'Golden Week'.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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