London close: Stocks weaker as Rio Tinto drags on FTSE

(Sharecast News) - London equities closed below the waterline on Thursday, with ex-dividend stocks proving to be a drag as investors digested the latest UK GDP reading.
The FTSE 100 ended the session down 0.37% at 7,193.23, and the FTSE 250 was off 0.04% at 23,746.77.

Sterling was in the red as well, last falling 0.29% against the dollar to $1.3832, and sliding 0.22% from the euro to trade at €1.1788.

"The FTSE 100 has underperformed today on the back of weakness in basic resources, with Rio Tinto shares down heavily due to trading ex-dividend, and which is acting as a 23-point drag on the index, along with weakness in Shell and BP shares which are also lower," said CMC Markets chief market analyst Michael Hewson.

"The FTSE 250, on the other hand, has continued to make new record highs, along with the DAX and Stoxx 600, although they have all slipped back from their intraday highs as a consequence of a little bit of weakness in US markets, just after the open."

Data released earlier by the Office for National Statistics showed the UK economy grew by 4.8% between April and June as lockdown restrictions eased, in line with expectations.

That was close to the 5% growth predicted by the Bank of England last week, and left the economy 4.4% below its pre-pandemic peak.

In the month of June, GDP rose 1%, which was ahead of the 0.8% expected by economists, although May's increase was revised down to 0.6% from 0.8%.

"The UK economy has continued to rebound strongly, with hospitality benefiting from the first full month of indoor dining, while spending on advertising was boosted by the reopening of many services," said ONS deputy national statistician Jonathan Athow.

The services sector was the biggest contributor to growth, with health, hospitality, and advertising services the main contributors to the growth in services in June.

"The latest UK GDP data confirms what we already knew - that the economy was on fire through the second quarter," said ING economist James Smith.

"Admittedly, a large part of the 4.8% quarterly growth is a simple function of the re-openings."

Smith noted that in June specifically, 0.45% of the 1% monthly growth came from health, which was linked to people visiting their GP more.

"Still, quirks aside, we saw a clear increase in optimism among both consumers and businesses through the spring, and that will undoubtedly have helped drive a faster recovery in activity."

Elsewhere in data, the UK housing market cooled in July as the stamp duty holiday began to taper off though prices continued to rise.

New buyer enquiries fell for the first time in four months and agreed sales dropped, according to the Royal Institution of Chartered Surveyors' monthly survey, with enquiries showing a net balance of -9% among RICS members, down from +10% in June, while agreed sales came in at -21%.

House prices rose as lack of supply pushed up valuations, with the survey showing 78% of respondents reporting rising prices, though that was a slight dip from 82%.

The outlook for prices strengthened, with 66% expecting an increase over the next 12 months, up from 56% in June.

"Although the tapering in stamp duty is beginning to have some impact on RICS activity indicators, the overall tone to the market remains firm with the metrics capturing price expectations showing few signs of wavering," said Simon Rubinsohn, chief economist at RICS.

"A strong message from survey respondents is that buyers are continuing to place a premium on space with the prospect of a hybrid model of work being adopted by many organisations providing the opportunity for greater flexibility around location."

Finally, across the pond, producer prices rose more quickly than anticipated last month due to the higher cost of energy and transportation.

According to the US Department of Labor, in seasonally adjusted terms, final demand prices jumped at a month-on-month pace of 1.0% in July, beating consensus expectations for a rise of 0.6%.

Final demand goods prices increased by 0.6% when compared against June, with a 2.6% jump in energy prices more than offsetting a 2.1% decline in food prices.

"If aggregate demand remains strong, as we have been forecasting, then businesses will have flexibility to raise product prices along their supply chains and to consumers," said Mickey Levy at Berenberg.

"Some of the price increases reflect supply bottlenecks; however, more and more, the mounting inflation pressures at the producer and consumer levels are taking on characteristics of traditional cyclical inflation generated by excess stimulus rather than temporary blips that will conveniently dissipate."

In equities, Rio Tinto was down 1.05%, Evraz slid 7.14%, and Royal Dutch Shell lost 1.8% on the top-flight index, as they traded without entitlement to the dividend.

Rio Tinto was particularly weak as it went ex-interim and special dividend.

Ex-dividend stocks feeling the pressure on the FTSE 250, meanwhile, included Jupiter Fund Management, which lost 0.41%, with Domino's Pizza Group slipping 0.24%.

Financial services firm Just Group tumbled 7.41% after saying it had fallen to an interim pre-tax loss as rising interest rates offset growth in adjusted operating profits.

The company posted a first-half pre-tax loss of £87.0m, compared to a £305.0m profit in the same period a year ago.

Holiday company TUI reversed earlier gains to close down 1.05%, after it reported a sharp rise in third-quarter revenue but said sales were down almost 80% for the first nine months of 2021.

On the upside, Aviva rallied 3.47% after saying it would return at least £4bn to shareholders over the next year as the insurer reported a 17% increase in adjusted interim profit.

Cineworld jumped 3.92% after it posted an interim operating loss of $208.9m as the Covid pandemic forced the closure of cinemas in the opening months of the year, but said trading since reopening had been "encouraging".

In broker note action, Ferguson was boosted 1.68% after Deutsche Bank lifted its price target on the stock to 11,800p from 10,100p, while AstraZeneca advanced 2.26% after JPMorgan resumed coverage of the shares at 'overweight'.

Market Movers

FTSE 100 (UKX) 7,193.50 -0.37%
FTSE 250 (MCX) 23,746.77 -0.04%
techMARK (TASX) 4,754.46 0.40%

FTSE 100 - Risers

Aviva (AV.) 420.90p 3.47%
Hargreaves Lansdown (HL.) 1,518.50p 2.57%
Smiths Group (SMIN) 1,481.00p 2.49%
Ferguson (FERG) 10,280.00p 1.63%
AstraZeneca (AZN) 8,311.00p 1.60%
Ashtead Group (AHT) 5,678.00p 1.39%
B&M European Value Retail S.A. (DI) (BME) 562.60p 1.15%
Hikma Pharmaceuticals (HIK) 2,542.00p 1.03%
Tesco (TSCO) 241.20p 0.96%
Informa (INF) 547.80p 0.96%

FTSE 100 - Fallers

Rio Tinto (RIO) 5,638.00p -7.59%
Evraz (EVR) 599.40p -6.93%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,086.00p -2.95%
M&G (MNG) 223.50p -2.83%
Legal & General Group (LGEN) 272.40p -2.61%
Coca-Cola HBC AG (CDI) (CCH) 2,661.00p -2.10%
InterContinental Hotels Group (IHG) 4,649.00p -1.96%
Rolls-Royce Holdings (RR.) 109.44p -1.94%
Royal Dutch Shell 'B' (RDSB) 1,454.20p -1.84%
SSE (SSE) 1,597.00p -1.75%

FTSE 250 - Risers

Savills (SVS) 1,301.00p 5.60%
Cineworld Group (CINE) 63.58p 3.79%
Marks & Spencer Group (MKS) 146.30p 3.28%
IntegraFin Holding (IHP) 570.50p 2.70%
Harbour Energy (HBR) 371.60p 2.60%
Trustpilot Group (TRST) 387.60p 2.43%
Reach (RCH) 401.00p 2.30%
Tyman (TYMN) 445.00p 2.18%
Ultra Electronics Holdings (ULE) 3,082.00p 2.05%
Hilton Food Group (HFG) 1,128.00p 1.99%

FTSE 250 - Fallers

Just Group (JUST) 98.40p -7.17%
Ferrexpo (FXPO) 417.00p -5.05%
Jupiter Fund Management (JUP) 266.60p -3.41%
Coats Group (COA) 70.40p -3.03%
Trainline (TRN) 360.00p -3.02%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,086.00p -2.95%
Kainos Group (KNOS) 1,801.00p -2.12%
4Imprint Group (FOUR) 3,010.00p -1.95%
CMC Markets (CMCX) 406.00p -1.93%
Direct Line Insurance Group (DLG) 309.90p -1.93%