Tesco Share News (TSCO)

(Alliance News) - Stocks in London ended lower on Tuesday after a gloomy IMF forecast, tough Brexit negotiations, and rising unemployment.

The FTSE 100 index lost 31.67 points, or 0.5%, closing at 5,969.71 points on Tuesday. The mid-cap FTSE 250 index finished down 276.70 points, or 1.5%, at 17,891.01. The AIM All-Share index closed 0.4% lower at 989.47 points.

The Cboe UK 100 index ended 0.7% lower at 592.82 points. The Cboe 250 ended 1.8% lower at 15,136.59, and the Cboe Small Companies closed down 1.0% at 9,461.53.

This followed the International Monetary Fund's forecast that the recession-wracked British economy will shrink by almost 10% this year on the coronavirus fallout.

A contraction in gross domestic product of 9.8% would however be an improvement on the previous IMF forecast of 10.2%, the IMF added.

The UK economy is predicted to grow by 5.9% in 2021, down from prior guidance of 6.3%, according to the its latest World Economic Outlook.

Britain, like many countries, is grappling with a renewed rise in Covid-19 infections, rolling out fresh social-distancing restrictions that are hampering economic recovery.

Recent official data showed that the UK economy shrank in the second quarter by almost a fifth - more than any European neighbour.

Britain's nationwide lockdown, imposed on March 23 for about three months, plunged the country into its deepest recession on record.

The outlook could meanwhile darken further if Britain and the EU fail to strike a post-Brexit trade deal, with fresh talks due this Thursday and Friday in Brussels.

Talks are at a critical stage and the bloc is prepared for the "worst-case" no-deal scenario, a senior German minister has said.

Michael Roth, German Chancellor Angela Merkel's Europe minister, said time was running out to conclude a deal and suggested the UK would have to give further ground on fishing rights, "level playing field" arrangements such as state subsidies, and the way any deal would be governed.

This comes after UK Prime Minister Boris Johnson announced the closure of pubs and bars across Merseyside on Monday as he launched a three-tier system of local alert levels for England.

The very high alert level will mean, at a minimum, the closure of pubs and bars and a ban on social mixing indoors and in private gardens.

Areas in the top tier will be able to impose extra restrictions, and in the Liverpool city region this will mean the closure of leisure centres, gyms, betting shops and casinos.

The UK's latest lockdown restrictions spell further trouble for the UK labour market, after figures on Tuesday morning showed the unemployment rate rose to 4.5% for the June to August period.

Consensus, according to FXStreet, had seen the jobless rate holding steady at the revised 4.3% seen for the May to July period.

The last time the unemployment rate was this high was back in 2017, when the rate was 4.5% for the three months to April and preceded by a rate of 4.6% for the three months to March.

Early numbers for September suggest there is "little change" in the number of payroll employees in the UK, the ONS said. While this is up 20,000 compared with August, the number of employees has fallen by 673,000 since March.

In mainland Europe, the CAC 40 in Paris ended 0.6% lower and the DAX 30 in Frankfurt finished down 0.9%.

The pound was quoted at USD1.2978 at the close on Tuesday, down from USD1.3070 at the London equities close Monday.

The euro was priced at USD1.1741, down from USD1.1807. Against the yen, the dollar was quoted at JPY105.53, up from JPY105.28.

In commodities, Brent oil was trading at USD42.30 a barrel at the close Tuesday, up from USD41.64 late Monday in London.

ActivTrades Chief analyst Carlo Alberto De Casa noted the price of oil could benefit in the near-future from Joe Biden winning the US Presidential election.

"The countdown to the US election is drawing into sharper focus and as the odds of a Biden victory increase (implied probability went up from 65% to 69% over the weekend), investors are betting on the likeliest scenarios for oil in the next few years. A Biden victory could see less support for the shale oil industry, pulling up the oil price as a result. Vice versa, if Trump manages to defeat forecasts, shale oil would probably benefit from the tycoon's help. Despite this, Trump could be supportive for the barrel through any potential new stimulus, which could boost (or drug?) the economy further," De Casa said.

Gold was USD1,890.88 an ounce, down from USD1,921.20.

In London, FTSE 100-listed SSE, ended 1.7% higher after agreeing to sell its 50% share in energy-from-waste ventures Multifuel Energy and Multifuel Energy 2.

SSE will be selling its share to European Diversified Infrastructure Fund III, an infrastructure fund managed by First Sentier Investors, for GBP995 million in cash. The transaction is expected to be completed in late 2020.

Tesco closed 1.5% following the latest grocery market figures from Kantar.

In the 12 weeks to October 4, UK take-home grocery sales grew by 9.4%. However, in the shorter period of four weeks to October 4, sales increased by 10.6%, an acceleration from September.

Among the "Big Four" UK grocers, Tesco saw a 9.2% sales rise to GBP7.84 billion, but its market share remained flat at 26.8%.

J Sainsbury booked a 6.8% sales jump to GBP4.35 billion. Its market share slipped to 14.9% from 15.3%. At Wm Morrison Supermarkets, sales rose 12% year-on-year to GBP2.95 billion, with market share up to 10.1% from 9.9%.

Morrisons shares were up 1.3% at the close, while Sainsbury's rose 1.2%.

Walmart's Asda had a 5.4% annual sales rise to GBP4.21 billion, but its market share fell to 14.4% from 15.0%. The US retail chain earlier in October agreed to sell Asda to Issa Brothers and UK-based private equity firm TDR Capital for GBP6.8 billion.

The global economic calendar for Wednesday has Spanish consumer price inflation at 0800 BST, followed by the US producer price index at 1330 BST. Also on Wednesday is the German Ifo joint economic forecast.

Also due Wednesday are annual results from FTSE 100 house builder Barratt Developments and online clothing retailer ASOS. Also due are trading statements from three FTSE 250 companies -security services company G4S, recruitment firm PageGroup, and emerging markets asset manager Ashmore Group.

By Anna Farley; annafarley@alliancenews.com

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