LONDON MARKET CLOSE: Stocks plunge as global recession fears mount

(Alliance News) - Stocks in London ended deeply in the red on Tuesday as growing recession risks sent shockwaves around global equity markets.

The FTSE 100 index closed down 207.18 points, or 2.9%, at 7,025.47.

The FTSE 250 ended down 277.64 points, or 1.5%, at 18,322.94 and the AIM All-Share closed down 7.56 points, or 0.9%, at 867.46.

The Cboe UK 100 ended down 3.0% at 700.20, the Cboe UK 250 closed down 1.8% at 15,891.59, and the Cboe Small Companies ended down 1.3% at 13,115.58.

In Paris the CAC 40 ended down 2.7%, while the DAX 40 in Frankfurt ended down 2.9%.

"The FTSE 100 looked like the most solid performer coming in to today's session, but small gains for some names have been outdone by the huge declines in commodities. As supply concerns give way to seemingly-inescapable recession worries, oil and mining stocks have gone deep into the red," said IG Group's Chris Beauchamp.

In the FTSE 100, Dechra Pharmaceuticals ended the best performer, up 5.4%, after RBC raised the veterinary products company to 'outperform' from 'sector perform'.

J Sainsbury closed up 1.3% even as the supermarket chain posted a slip in first quarter sales.

Sainsbury's said grocery sales in the first quarter ended June 25 fell 2.4% yearly "against last year's elevated Covid-19 driven levels". On three years earlier, prior to the onset of the pandemic, grocery sales were 8.7% higher.

Total retail sales, excluding fuel, were down 4.5% yearly. Including fuel, they were down 4.0%.

Looking ahead, Sainsbury's backed its profit outlook as it continues to expect underlying pretax profit of between GBP630 million and GBP690 million. It had reported underlying pretax profit of GBP730 million in financial 2022, so it expects a decline of as much as 14%.

At the other end of the large-caps, energy stocks ended among the worst performers, tracking spot oil prices lower. BP closed down 7.2%, Shell down 8.7% and Harbour Energy down 9.6%.

Brent oil was quoted at USD105.18 a barrel at the equities close, sharply lower from USD113.66 at the close Monday.

Forex.com analyst Fawad Razaqzada commented: "Crude oil prices have slumped as weakening demand concerns are starting to outweigh fears about tight supply. A growing number of analysts are expecting that many of the world's leading economies will suffer negative growth in the next few months, and this will drag the US into a recession. Central banks around the world now have a single mandate and are aggressively tightening monetary policy in an effort to bring inflation under some form of control.

"With investors now fearful that a recession might be looming, they are selling everything now: crude oil, copper, stocks, crypto - you name it. It looks like investors are also expecting the potential recession to be a prolonged one."

Separately, Shell said it, alongside the United Co for Industry have signed a deal with Saudi Aramco for the construction and operation of a Metals Reclamation Complex, for recovering and recycling metals in Al-Jubail industrial city, Saudi Arabia.

The United Co for Industry is part of the Aljomaih Group of Companies, a Saudi Arabian industrial group. United Co in particular invests in manufacturing assets to support the development of advanced downstream industries.

Also on Tuesday, the FTSE 100 oil major announced that it has been picked by QatarEnergy as a partner in the USD29 billion North Field East expansion project in Qatar, currently the largest liquefied natural gas project.

The pound was quoted at USD1.1900 at the London equities close, down from USD1.2114 at the close Monday, despite positive UK economic data.

The latest S&P Global/CIPS UK services purchasing managers' index expanded to 54.3 points in June, from 53.4 in May. It was the sixteenth successive month in which the index has registered above the 50.0 mark, which separates growth from decline. The final June figure was above the 53.4 flash estimate.

The euro stood at USD1.0240 at the European equities close, plunging from USD1.0430 late Monday. The common currency for the euro area fell to an intraday low of USD1.0237 in afternoon trade - its lowest level since late 2002 after disappointing purchasing managers' index data from the continent.

The eurozone's private sector growth slowed in June, succumbing to weaker demand and falling confidence.

The S&P Global eurozone composite PMI fell to 52.0 points in June from 54.8 in May. The tally remained above the 50.0 no change threshold, though the figure suggests private sector growth has eased. The pace of the expansion was "modest overall", S&P Global said.

"Stalling demand conditions and weaker activity growth were reflected in a further dampening in business confidence amongst eurozone firms. The level of sentiment was the weakest since October 2020 and subdued in the context of historical data," S&P Global said.

"On the price front, cost burdens surged further, albeit with the rate of inflation retreating further from March's peak. Consequently, charges levied rose at a slightly reduced pace, but one that was nonetheless marked."

The eurozone services purchasing managers' index reading alone fell to 53.0 in June from 56.1 in May, figures showed.

In addition, the single currency also dived as investors eyed aggressive interest rate hikes by the US Federal Reserve in its fight against inflation, in contrast with the European Central Bank which plans more modest increases amid fears the bloc could fall into recession.

Against the yen, the dollar was trading at JPY135.90, up from JPY135.72 late Monday.

Stocks in New York were in the red at the London equities close following the long holiday weekend in the US. The DJIA was down 2.2%, the S&P 500 index down 1.9% and the Nasdaq Composite down 1.0%.

On Wall Street, Tesla fell 3.6% after Elon Musk's electric vehicle maker reported disappointing second-quarter auto deliveries due to a weeks-long closure of its factory in China.

Gold stood at USD1,767.88 an ounce at the London equities close, lower against USD1,808.30 late Monday.

The economic events calendar on Wednesday has US services PMI at 1445 BST and the US Federal Reserve meeting minutes at 1900 BST.

The UK corporate calendar on Wednesday has annual results from Redde Northgate. There are also trading statements from Robert Walters and Topps Tiles.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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