London midday: Stocks slide as UK business growth hits 11-month low

(Sharecast News) - London stocks were firmly in the red by midday on Monday after a survey showed that business growth in the UK slid to an 11-month low in January, while growing tensions between Russia and Ukraine also weighed on sentiment.
The FTSE 100 was down 1.2% at 7,401.26.

A survey released earlier showed the economy faltered in January after the rapid spread of Omicron weighed heavily on the service sector.

The flash IHS Markit/CIPS UK Composite Output Index fell to 53.4 from December's final reading of 53.6. Most analysts had expected a rise, with consensus at 54.0.

Within that, the flash manufacturing output index strengthened to a five-month high of 53.8 from 53.6 in December. But the manufacturing PMI eased to 56.9 from 57.9, while the services business activity index was 53.3, an 11 month-low compared to December's 53.6.

IHS Markit noted: "With hospitality, leisure and travel all struggling due to Omicron restrictions, this offset resilient growth in business and financial services."

Manufacturers fared better during the month as material shortages started to ease. But staff absences affected all sectors, while input cost inflation remained "stubbornly high", largely reflecting stronger cost pressures in the service sector.

Chris Williamson, chief business economist at IHS Markit, said: "A resilient rate of economic growth in the UK during January masks wide variations across different sectors. Consumer0facing businesses have been hit hard by Omicron, and manufacturers have reported a further worrying weakening of order book growth. But other business sectors have remained encouragingly robust.

"Looking ahead, while the Omicron wave meant the hospitality sector has sunk into a third steep downturn, these restrictions are now easing, meaning this downturn should be brief."

More broadly, tensions between Russia and Ukraine were denting the mood.

Russ Mould, investment director at AJ Bell, said: "The shifting market landscape is further complicated by the increasingly noisy sabre rattling by Russia on the Ukrainian border. Escalation to a full armed conflict is likely to prompt market volatility and potentially a further surge in energy prices - only adding to the current inflationary pressures."

Later in the week, investors will be looking to the Federal Reserve's latest policy meeting amid expectations of a first interest rate hike in March and more hikes this year than had previously been expected.

In equity markets, housebuilders were under the cosh, with Barratt and Berkeley both lower after downgrades at Jefferies.

On the upside, Unilever rallied following reports that Nelson Peltz's activist hedge fund Trian has built a stake in the consumer goods maker.

Vodafone gained following reports that it has been looking at buying Three UK and that it has entered talks with rival Iliad to strike a deal to merge their businesses in Italy.

Computacenter rose as it forecast annual profits to be slightly in excess of £250m after a better-than-expected fourth quarter despite a higher pound and supply shortages.

Outside the FTSE 350, De La Rue sank after the banknote printer warned over full-year profits, pinning the blame on Covid-related disruptions and supply chain issues.

Market Movers

FTSE 100 (UKX) 7,401.26 -1.24%
FTSE 250 (MCX) 21,763.67 -2.24%
techMARK (TASX) 4,402.90 -0.93%

FTSE 100 - Risers

Unilever (ULVR) 3,885.50p 5.73%
Vodafone Group (VOD) 124.20p 5.67%
Hargreaves Lansdown (HL.) 1,324.00p 1.73%
British American Tobacco (BATS) 3,187.50p 1.58%
BT Group (BT.A) 191.40p 1.40%
Imperial Brands (IMB) 1,750.50p 1.13%
Sainsbury (J) (SBRY) 286.30p 0.92%
Reckitt Benckiser Group (RKT) 6,484.00p 0.62%
BAE Systems (BA.) 600.00p 0.50%
Meggitt (MGGT) 736.60p 0.49%

FTSE 100 - Fallers

Polymetal International (POLY) 1,123.50p -7.95%
Barratt Developments (BDEV) 630.40p -6.52%
Scottish Mortgage Inv Trust (SMT) 1,042.00p -6.08%
Evraz (EVR) 510.00p -5.66%
Pearson (PSON) 623.00p -5.46%
Persimmon (PSN) 2,410.00p -5.45%
Entain (ENT) 1,556.00p -4.83%
Berkeley Group Holdings (The) (BKG) 4,170.00p -4.58%
Taylor Wimpey (TW.) 149.75p -4.40%
Glencore (GLEN) 392.50p -4.28%

FTSE 250 - Risers

Airtel Africa (AAF) 150.00p 3.73%
Playtech (PTEC) 592.00p 2.16%
Hiscox Limited (DI) (HSX) 951.40p 1.47%
Endeavour Mining (EDV) 1,680.00p 1.20%
Ultra Electronics Holdings (ULE) 2,988.00p 0.81%
Great Portland Estates (GPOR) 764.50p 0.53%
Beazley (BEZ) 488.60p 0.47%
3i Infrastructure (3IN) 354.00p 0.43%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 104.20p 0.39%
Schroder Oriental Income Fund Ltd. (SOI) 274.00p 0.37%

FTSE 250 - Fallers

Baltic Classifieds Group (BCG) 178.00p -10.55%
Darktrace (DARK) 382.40p -9.81%
Baillie Gifford US Growth Trust (USA) 208.00p -9.76%
Petropavlovsk (POG) 14.17p -8.40%
Trustpilot Group (TRST) 196.90p -8.33%
Ferrexpo (FXPO) 228.20p -7.76%
Allianz Technology Trust (ATT) 256.00p -7.58%
Auction Technology Group (ATG) 1,046.00p -7.43%
Reach (RCH) 248.00p -7.29%
Edinburgh Worldwide Inv Trust (EWI) 212.00p -7.22%