London close: Stocks turn lower on renewed interest rate concerns

(Sharecast News) - London's financial markets had turned negative by the close of trading on Monday, after better-than-expected UK services data was offset by a downward revision in service activity in the United States.

The FTSE 100 index closed marginally lower, down 0.04% at 7,612.86 points, while the FTSE 250 fared worse with a decline of 0.8%, finishing at 19,018.55 points.

In currency markets, sterling was last down 0.8% on the dollar, trading at $1.2530, while it dipped 0.32% against the euro to change hands at €1.1671.

"Markets managed to shrug off Friday's stellar payrolls report, but today's ISM services PMI seems to have dealt the death blow to any lingering hopes that a March rate cut was still on the cards," said IG chief market analyst Chris Beauchamp.

2It looks like the relentless optimism seen so far on Wall Street is finally beginning to collide with reality, delivering a 400-point slump on the Dow and knocking the S&P 500 off course from its march to 5000."

Beauchamp said the selling in US markets had spread back across the Atlantic, but with sterling "at the mercy of a rampant dollar", the losses for the FTSE 100 had been contained for now.

"But no central bank seems in much of a hurry to cut rates, so the pain for stocks on both sides of the ocean seems set to continue."

UK services sector expands, US service data revised downwards

In economic news, fresh data showed the UK services sector experiencing robust growth in January, reaching its highest level in eight months.

The S&P Global services purchasing managers' index (PMI) climbed to 54.3, surpassing December's 53.4 and exceeding both initial estimates and consensus expectations of 53.8.

It marked the third consecutive month that the index remained above the 50-point threshold, indicating expansion.

The composite PMI, which measures activity across the services and manufacturing sectors, also saw an increase to 52.9 in January from 52.1, marking the highest reading since May 2023.

"The revival in UK service sector performance gained momentum at the start of 2024, with output growth accelerating to its fastest for eight months amid stronger business and consumer spending," said Tim Moore, economics director at S&P Global.

"New orders have also rebounded this winter as receding recession risks and looser financial conditions led to greater willingness-to-spend among clients."

Moore said inflationary pressures subsided during January, despite stronger demand conditions.

"Latest data indicated that total input costs increased at one of the slowest rates seen in the past three years.

"Softer cost inflation reflected lower energy and fuel costs, alongside falling raw material prices."

Elsewhere, the Office for National Statistics (ONS) revised the UK unemployment rate for late 2023 based on new population data.

According to Monday's Labour Force Survey (LFS), employment increased by 108,000 in the three months to November, surpassing the initial estimate of 73,000.

As a result, the jobless rate for that period was adjusted to 3.9%, down from the previously estimated 4.2%.

"It seems very likely, therefore, that the official unemployment rate estimate for the fourth quarter, published on 13 February, will undershoot the Monetary Policy Committee's 4.3% estimate in last week's Monetary Policy Report, as well as the committee's estimate of its equilibrium rate, 4.5%," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Across the Atlantic, S&P Global reported that the US services PMI stood at 52.5 in January, slightly lower than the preliminary reading of 52.9 but still the strongest reading in seven months.

New orders increased due to improved domestic demand conditions and a significant rise in new export orders.

US firms expressed optimism about future output, increasing their workforce in response to expanding backlogs.

Output charges also rose at a slower pace, aided by reduced growth in input costs.

In a global view, the Organization for Economic Cooperation and Development (OECD) upgraded its global growth outlook in its February interim report.

GDP was now expected to expand by 2.9% in 2024, up from 2.7% predicted in November.

The increase was attributed to higher economic activity in the US, driven by increased government and consumer spending.

Despite a slight decrease from 2023's 3.1% growth, the OECD remained optimistic about 2025, maintaining its forecast of 3.0% growth.

In the eurozone, the economy showed early signs of recovery in January, with growing inflationary pressures supporting the European Central Bank's decision to maintain record-high interest rates.

The composite PMI increased to 47.9 from December's 47.6, aligning with initial forecasts.

While the services PMI dipped slightly to 48.4, the HCOB eurozone manufacturing PMI reached its highest reading in ten months at 46.6.

Although the composite PMI indicated improvement, it still fell short of the 50-point threshold, signifying continued growth challenges.

Finally on data, China's services sector experienced slower-than-expected growth in January, as revealed by the Caixin services PMI.

The index dropped to 52.7 from December's 52.9, missing expectations for an increase to 53.0.

CMC Markets surges, Vodafone slides on fall in revenue

On London's equity markets, CMC Markets surged 18.22% after the spreadbetting and CFD trading provider announced its intentions to cut 200 jobs as part of a cost-cutting program projected to save £21m.

Land Securities Group added 1.23% after an upgrade from 'equalweight' to 'overweight' by Morgan Stanley.

British Land also benefited from the bank reiterating its 'overweight' rating.

Morgan Stanley noted the challenging past decade for shareholder returns due to various factors, including retail headwinds, Brexit-related uncertainty, and the impact of Covid-19.

However, it suggested that stabilising property yields and solid total net asset value-based returns could lead to a significant re-rating for these companies.

Auction Technology Group continued its upward momentum with a 3.84% increase.

The art and antique online marketplace operator announced that it expected annual results to align with expectations after reporting an 11% rise in revenue for the first three months of the year.

Watches of Switzerland Group also saw positive movement, rising by 3% ahead of an upcoming trading update by the luxury timepiece seller.

Just a few weeks ago, the company faced a significant setback when it lowered its annual revenue guidance due to decreased demand and anticipated volatile trading conditions.

On the downside, Vodafone Group declined 2.74% after it reported a fall in third-quarter service revenues.

Service revenues fell 1.4% to €9.3bn on a reported basis.

Despite that, Vodafone maintained its full-year guidance, expecting adjusted core earnings of approximately €13.3bn and adjusted free cash flow of €3.3bn.

JD Sports Fashion faced decline of 5.27% following reports that Applied Nutrition, a company part-owned by JD Sports and based in Liverpool, was preparing for a £1bn flotation on the London market.

Kingfisher, the owner of B&Q and Castorama, slid 2.1% after JPMorgan Cazenove lowered its price target on the company's shares from 190p to 180p and placed them on 'negative catalyst watch' ahead of the full-year results scheduled for 25 March.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,612.86 -0.04%

FTSE 250 (MCX) 19,018.55 -0.80%

techMARK (TASX) 4,369.58 0.08%

FTSE 100 - Risers

Ocado Group (OCDO) 523.00p 3.56%

GSK (GSK) 1,662.60p 3.19%

Croda International (CRDA) 4,943.00p 1.65%

Smith & Nephew (SN.) 1,115.00p 1.64%

Diageo (DGE) 2,984.00p 1.62%

Unilever (ULVR) 3,918.00p 1.37%

Informa (INF) 785.60p 1.34%

Haleon (HLN) 329.15p 1.28%

Flutter Entertainment (DI) (FLTR) 16,695.00p 1.24%

Land Securities Group (LAND) 659.00p 1.23%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 107.05p -5.27%

Airtel Africa (AAF) 106.50p -4.40%

Ashtead Group (AHT) 5,132.00p -3.97%

Barclays (BARC) 145.68p -3.34%

Vodafone Group (VOD) 66.33p -3.31%

Weir Group (WEIR) 1,759.50p -2.92%

Persimmon (PSN) 1,411.00p -2.45%

Glencore (GLEN) 408.30p -2.23%

Kingfisher (KGF) 210.10p -2.10%

IMI (IMI) 1,682.00p -2.04%

FTSE 250 - Risers

Helios Towers (HTWS) 76.95p 4.41%

Auction Technology Group (ATG) 541.00p 3.84%

Pets at Home Group (PETS) 278.40p 3.34%

Watches of Switzerland Group (WOSG) 371.60p 3.00%

Babcock International Group (BAB) 462.00p 2.67%

Polar Capital Technology Trust (PCT) 2,795.00p 2.38%

Trustpilot Group (TRST) 179.10p 1.59%

Asia Dragon Trust (DGN) 347.00p 1.46%

Worldwide Healthcare Trust (WWH) 322.00p 1.42%

JPMorgan Japanese Inv Trust (JFJ) 508.00p 1.40%

FTSE 250 - Fallers

Harbour Energy (HBR) 257.90p -4.55%

Ithaca Energy (ITH) 129.80p -4.42%

OSB Group (OSB) 423.80p -4.25%

Savills (SVS) 963.00p -3.99%

Howden Joinery Group (HWDN) 769.60p -3.96%

Spirent Communications (SPT) 113.10p -3.74%

Tyman (TYMN) 293.50p -3.61%

Sirius Real Estate Ltd. (SRE) 86.25p -3.54%

Barr (A.G.) (BAG) 551.00p -3.50%

Drax Group (DRX) 475.50p -3.47%