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(Alliance News) - A mixed bag of UK PMI readings weighed on stocks in London on Tuesday, offsetting gains from oil majors as concerns over Russian energy supply lifted commodity prices.
The FTSE 100 index was down 23.43 points, or 0.3%, at 7,510.36 midday Tuesday. The mid-cap FTSE 250 index was down 82.09 points, or 0.4%, at 19,417.25. The AIM All-Share index was down 4.65 points, or 0.5%, at 902.63.
The Cboe UK 100 index was down 0.3% at 750.15. The Cboe 250 was down 0.5% at 16,736.82, but the Cboe Small Companies was up 0.1% at 14,186.99.
In mainland Europe, the CAC 40 in Paris was down 0.2%, while the DAX 40 in Frankfurt was down 0.1%.
Stocks in London were underperforming continental Europe as investors digested a "dire" UK manufacturing PMI for August.
The S&P Global-Chartered Institute of Procurement & Supply flash UK composite purchasing managers' index slipped to an 18-month low of 50.9 points in August from 52.1 in July. The reading remains above the no-change mark of 50.0, indicating the economy is still growing, but is edging closer to stagnation.
This was due to the manufacturing PMI slumping to 46.0 points from 52.1, well below expectations of 51.1.
It contrasted with a resilient services sector, which had a score of 52.5 points, down only marginally from 52.6 in July. Consensus had pencilled in a larger drop to 52.0.
Sterling was weaker, quoted at USD1.1751 midday Tuesday from USD1.1787 at the London equities close on Monday.
"The UK PMI data held up overall better than the eurozone numbers, but the manufacturing figure was dire. Whatever else the weaker pound is doing, it's not helping UK manufacturing enough to offset the other negative factors hitting the economy," said Societe Generale's Kit Juckes.
The flash eurozone PMI composite output index fell to an 18-month low of 49.2 points in August from 49.9 in July. Nonetheless, the reading did beat consensus, according to FXStreet, of 49.0.
The reading, below the no-change mark of 50, indicates the eurozone's downturn worsened in August.
The deterioration was driven by the services PMI dropping to 50.2 points in August from 51.2 in July. Meanwhile, the manufacturing PMI posted a smaller decline, but remained in contraction territory with a score of 49.7 versus 49.8 the month before.
The euro was trading at USD0.9918 around midday in London, down from USD0.9964 late Monday.
Against the yen, the dollar was quoted at JPY137.42, up versus JPY137.26. Gold was quoted at USD1,736.89 an ounce, marginally higher against USD1,736.39 on Monday.
Stocks in New York were pointed to a rebound on Tuesday after losses to start the week. The Dow Jones and S&P 500 were both called up 0.1%, and the Nasdaq Composite was pointed 0.2% higher.
The tech-heavy Nasdaq bore the brunt of Monday's decline on Wall Street, closing down 2.6%.
In London, there was a read-across to tech stocks with online grocer Ocado down 3.6%, the worst performer in the FTSE 100.
Towards the other end of the index were oil majors, with Shell up 1.8% and BP up 1.5%, tracking commodity prices higher. A barrel of Brent oil was trading at USD97.91 at midday, up from USD93.26 late Monday.
Energy supply concerns were renewed after Russian supplier Gazprom said gas deliveries through the Nord Stream pipeline will cease from August 31 to September 2 for "maintenance".
"It is necessary to carry out maintenance every 1,000 hours" of operation, Gazprom said in a statement. As a result, "gas transportation through the Nord Stream pipeline will be suspended for three days".
News of energy prices ticking upwards again added to inflation fears. A spike in gas prices following the Nord Stream announcement has added close to GBP500 per annum to the forecasted UK energy price cap next year, hitting UK households already struggling to pay the bills.
Energy experts at consultancy Auxilione expect the price cap to rise to GBP3,576 from the start of October, hitting GBP5,066 in January before rising even further to GBP6,552 from April. It will then fall back a little, but still remain at what would have been record prices previously, hitting GBP5,897 in July 2023 and GBP5,548 three months later.
Ofgem is set to announce its price cap decision for October at the end of this week. Analysts widely expect the cap to top GBP3,500, from GBP1,971 today.
This was putting consumer-facing stocks under pressure as household incomes look set to be squeezed further, with retailer Frasers Group the worst performing mid-cap, down 4.7%, and footwear seller Dr Martens down 4.1%.
John Wood Group was down 2.5% after the engineering and consulting firm reported a widened interim loss as revenue stalled, and said cash generation is its "top priority" going forward.
Revenue for the six months to June 30 edged 0.4% lower to USD2.56 billion from USD2.57 billion a year before. However, the engineering and consulting firm's pretax loss nearly doubled to USD31.5 million from USD18.4 million as finance expenses rose 19% to USD64.1 million from USD53.9 million.
"The strong order book gives me confidence for the future but there is a lot more to do on cash generation and this is our top priority," said Chief Executive Ken Gilmartin.
The company suffered free cash outflow of USD363 million, which included a working capital outflow of USD208 million and exceptional cash costs of USD102 million.
Elsewhere in London, shares in Cineworld were down 16%, taking its year-to-date share price slide to 92%. The stock had fallen 21% on Monday.
The cinema chain operator on Monday confirmed it is considering filing for Chapter 11 bankruptcy in the US, as it continues to battle with liquidity issues.
Last week, Cineworld warned that lacklustre trading was prompting potential financing decisions that could significantly dilute shareholders. This was followed by a report by the Wall Street Journal on Friday that the London-based cinema chain had engaged with lawyers from Kirkland & Ellis and consultants from AlixPartners to advise Cineworld on its bankruptcy process.
In response, on Monday Cineworld said strategic options through which it may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the US and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.
By Lucy Heming; lucyheming@alliancenews.com
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