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(Alliance News) - London's FTSE 100 was higher on Thursday afternoon, but gains were hard to come by for domestically-focused stocks, as bond market turmoil and a slump for the pound persisted.
The FTSE 100 index was up 46.80 points, 0.6%, at 8,297.83. The FTSE 250 was down 95.22 points, 0.5%, at 19,857.02, and the AIM All-Share lost 0.68 of a point, 0.1%, at 719.43.
The Cboe UK 100 was up 0.6% at 830.81, the Cboe UK 250 lost 0.5% at 17,288.02, and the Cboe Small Companies was down 1.5% at 15,395.56.
The CAC 40 in Paris was 0.3% higher, while the DAX 40 in Frankfurt was down 0.2%.
The pound faded to USD1.2294 early Thursday afternoon, from USD1.2351 late Wednesday. Sterling fell as low as USD1.2239 on Thursday, its worst level since November 2023. The euro was unmoved at 1.0303. Against the yen, the dollar fell to JPY157.86 from JPY158.37.
Brent fetched USD76.32 a barrel, rising from USD76.25. Gold firmed to USD2,672.79 an ounce, from USD2,665.55.
"Pressure on sterling and the UK Gilts has continued. The pound took out last year's low near USD1.23 today and was pressed to USD1.2240. The 10-year yield is rising for the fourth consecutive session and is near 4.85%, up nearly 25 bp this week. Fiscal concerns amplified by weak growth appears to be the main culprit," Bannockburn Global Forex analyst Marc Chandler commented.
Economists have warned Chancellor Rachel Reeves could be forced into further tax hikes or cuts to spending plans to meet UK fiscal rules after the jump in government borrowing costs.
The rise in the cost of servicing government debts could cut into Labour's expected financial headroom in a potentially worrying sign of how investors see fiscal sustainability in the UK.
AJ Bell analyst Russ Mould commented: "Chancellor Rachel Reeves implied from the start that tough decisions were needed to lay stronger foundations for longer term growth, meaning life could get worse before it gets better. The storm clouds have certainly darkened. Investors are worried about extra borrowing by the government to achieve its plans. However, it is worth noting that the pound remains considerably stronger than when Liz Truss briefly ran the country. The UK is also not alone in seeing a higher cost of borrowing for the government as the US has also seen higher yields.
"Negativity has spread to parts of the UK equity market with the more domestic-focused FTSE 250 index having a terrible time."
B&M and Greggs heaped more pressure on the FTSE 250, sliding 13% and 11% on poorly-received trading statements.
Recruiter Hays fell 5.8% after Morgan Stanley cut the stock to 'underweight'.
Among London's large-caps, improved Christmas trading was not enough to lift Tesco and M&S shares, the duo lost 7.3% and 1.8%.
Tesco hailed its "biggest ever Christmas" and the grocer maintained its yearly guidance. In the six weeks to January 4, which included the key festive period, it achieved retail like-for-like sales growth of 3.8% on-year. Sales growth picked up from the 2.8% achieved in the 13 weeks to November 22, the supermarket chain's third-quarter. For the combined 19 week period, like-for-like sales rose 3.1%. Total sales amounted to GBP23.94 billion over the 19 weeks, a rise of 3.3% on-year at actual rates, or 4.0% at constant currency.
"We invested to bring the best value, quality and service to everyone, no matter how or where they shopped with us. As a result, we delivered our biggest ever Christmas, with continued market share growth and switching gains," Chief Executive Ken Murphy said.
Tesco expects retail adjusted operating profit for the financial year of GBP2.9 billion, its guidance affirmed. It would represent a rise from GBP2.76 billion in financial 2024.
M&S reported bullish sales in its Food arm, more modest gains in Clothing, Home & Beauty, and a decline in its International offering.
The retailer said total sales in the 13 weeks to December 28 rose 5.6% on-year to GBP4.06 billion. The loftiest growth came in its Food unit, where sales rose 8.7% to GBP2.58 billion. Clothing, Home & Beauty sales were up 1.0% to GBP1.31 billion.
XTB analyst Kathleen Brooks commented: "While the sell off in M&S seems unwarranted since its trading update was decent, the market is targeting UK listed companies with a domestic focus."
In contrast, companies with less of a domestic focus shone. Miners Antofagasta, Anglo American and Rio Tinto rose 4.4%, 4.0% and 2.5%, despite underwhelming China data.
China narrowly avoided slipping into deflation in December with prices rising at their slowest pace in nine months, official figures showed Thursday, as Beijing struggles to kickstart consumer activity in the world's number two economy.
The tepid reading comes after the government unveiled a range of measures at the end of last year aimed at boosting consumption as well as providing support for the troubled property sector, including interest rate cuts.
However, data showed that has not yet filtered through, with the consumer price index, a key measure of inflation, easing to growth of 0.1% on-year last month, from 0.2% in November, according to the National Bureau of Statistics. The reading is the lowest since March. A survey of economists had forecast 0.1%.
Back in London, Impax Asset Management declined 4.4% as it grappled with outflows in its first-quarter. The firm reported assets under management decline 8.3% quarter-on-quarter to GBP34.11 billion at its December 31 first-quarter end.
"This quarter we saw relatively high outflows, notably the closure of our smaller mandate with St James's Place and redemptions driven by industry consolidation in our institutional channel in the Asia-Pacific region," CEO Ian Simm said. "More positively, we have continued to see a slow-down in outflows from our largest European distribution partner, BNP Paribas Asset Management, and from our US mutual funds."
It reported net outflows of GBP2.42 billion for the period, as well as a GBP660 million hit from the performance, market movement, and foreign exchange.
In December, shares in Impax had slumped after the company received notice that it has lost some business from St James's Place.
SJP terminated Impax Asset Management's mandate to manage the Sustainable & Responsible Equity Fund. The termination is to take effect in February.
On Thursday, equity markets in New York are closed for a day of mourning following the death of Jimmy Carter.
By Eric Cunha, Alliance News news editor
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