London close: Stocks slip on slew of UK data

London stocks ended lower on Monday as investors digested a series of UK economic data and monitored developments in North American trade negotiations.

The FTSE 100 index fell 0.43% to close at 8,760.96 points, while the FTSE 250 slipped 0.41% to 21,626.26 points.

In currency markets, sterling was last down 0.04% on the dollar to trade at $1.3711, and weakened 0.41% against the euro, changing hands at €1.1657.

“There is a lot going on to influence markets before the summer lull and investors’ animal spirits continue to fuel the equities space,” said Dan Coatsworth, investment analyst at AJ Bell.

“Investors seem confident trade deals will be struck, geopolitical tensions ease, and a major economic slump is avoided.

“The big unknown is whether investors are correct or are simply being too complacent.”

Coatsworth said that, following “yet another bust-up” between the US and Canada, the latter had now scrapped its digital services tax aimed at US tech firms and resumed trade talks.

“This has brought a sense of calm to markets, also helped by an extended deadline for negotiations whereby Canada has an extra week and a bit to agree a trade deal.

“It also provides some hope that other countries will get extra time to deal with the Trump administration beyond the 9 July cut-off.”

UK economy expands as expected, UK businesses still pessimistic

On the data front, the UK economy expanded by 0.7% in the first quarter, according to fresh official data, matching the initial estimate released in May.

Growth was driven by a 0.7% rise in the services sector, alongside a 1.3% increase in industrial production and modest 0.3% growth in construction.

“While overall quarterly growth was unrevised, our updated set of figures show the economy still grew strongly in February, with growth now coming in a little higher in March too,” said ONS director of economic statistics Liz McKeown.

“There was broad based growth across services, while manufacturing also had a strong quarter.

“The saving ratio fell for the first time in two years this quarter, as rising costs for items such as fuel, rent and restaurant meals contributed to higher spending, although it remains relatively strong.”

Despite the solid start to the year, UK businesses remain pessimistic about near-term prospects.

The Confederation of British Industry reported a balance of -18 for private sector expectations over the next three months, indicating more firms expect a decline than growth.

While it marked an improvement from May’s -30, retail and wholesale sentiment was particularly weak, registering a balance of -40—the worst since late 2022.

“While negative expectations for activity have eased a little, our surveys still point to challenging conditions for businesses,” said Alpesh Paleja, CBI deputy chief economist.

“Firms cite a very mixed picture on activity; while there are pockets of strength in the economy, it’s clear that sizable headwinds to growth remain.

“Companies are still grappling with higher employment costs, cautious spending behaviour on the part of households, and increasing global uncertainty.”

In housing, mortgage approvals rose more than expected in May, with 63,032 approvals compared to forecasts of 59,750.

Net mortgage borrowing also increased by £2.8bn, reversing April’s sharp slump.

Meanwhile, the average interest rate on new mortgages edged down slightly to 4.47%.

“An easing in stamp duty distortions and a fall in quoted mortgage rates supported stronger mortgage activity in May,” noted Matt Swannell, chief economic advisor to the EY Item Club.

“Now that volatility has started to ease, the fundamental drivers of mortgage demand should reassert themselves.

“Mortgage rates are now much lower than they have been for most of the past three years, while nominal earnings growth has been strong.”

On the continent, Germany’s inflation rate unexpectedly fell to 2% in June, hitting the European Central Bank’s target and coming in below analysts’ forecasts of 2.2%.

However, German retail sales disappointed, dropping 1.6% in May for the steepest monthly fall since late 2022, driven by broad-based weakness in food, non-food, and online sales.

Across the Atlantic, business activity in the Chicago region of the US deteriorated further in June.

The Chicago Business Barometer slipped to 40.4, its lowest since January and marking the 19th consecutive month below the neutral 50 level.

While new orders improved slightly, declines in production, employment, and order backlogs signalled deepening weakness.

Defence names in the green, housebuilders slump

On London’s equity markets, defence firms were among the main risers.

Rolls-Royce added 1.61%, Babcock rose 0.79%, and BAE Systems gained 1.05%.

Tufan Erginbilgic, chief executive of Rolls-Royce, confirmed over the weekend that the company will return to the larger ‘narrow body’ or ‘single aisle’ market as Labour put the move at the heart of its industrial strategy.

“This is the single-biggest opportunity for economic growth for the UK in the next 50 years,” he told the Sunday Times.

Babcock was meanwhile buoyed by a price target hike from Citi, which raised its forecast to 1,338p from 730p and reiterated a ‘buy’ rating, citing long-term growth prospects.

Elsewhere, Chemring climbed 1.63% after announcing the acquisition of software-defined radio specialist Landguard Nexus for up to £20m.

Indivior surged 7.2% following its inclusion in the US Russell 2000 Index, effective from Monday.

On the downside, Centrica fell 1.41% after JPMorgan downgraded the stock to ‘neutral’ from ‘overweight’, citing limited further upside.

Water utility Pennon slipped 0.29%, reversing early gains despite an upgrade to ‘buy’ from Deutsche Bank.

Housebuilders saw broad declines amid sector pressure.

Persimmon and Barratt Redrow both dropped 3.8%, while Taylor Wimpey slid 2.33%.

Vistry fell 2.97%, Bellway lost 2.62%, and Crest Nicholson was the weakest performer, down 4.11%.

RBC Capital Markets said in a research note that the recent Spending Review delivered “significantly ahead” of its expectations but also questioned whether solving for supply has shifted the problem to demand.

“Two of the key building blockers have now, on paper, been addressed,” it said.

“It will take time for the planning changes to take effect and for the £39bn Affordable Housing Programme to be deployed, but our RBC Elements Homefi data suggests that whilst two problems have been fixed, another one may be about to emerge.

“The Labour Party may have beat the blockers, but does it now need to provide a boost for buyers?”

WH Smith plunged 6.16% after revealing it sold its high street business for £12m less than expected, following weaker trading.

PRS REIT also declined, shedding 3.74%, after Long Harbour emerged as the sole bidder for the company with a £115-per-share offer.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,760.96 -0.43%
FTSE 250 (MCX) 21,626.26 -0.41%
techMARK (TASX) 5,075.28 -0.33%

FTSE 100 - Risers

Imperial Brands (IMB) 2,877.00p 1.88%
Airtel Africa (AAF) 180.30p 1.81%
Flutter Entertainment (DI) (FLTR) 20,640.00p 1.67%
Rolls-Royce Holdings (RR.) 967.60p 1.40%
BAE Systems (BA.) 1,886.50p 1.32%
Coca-Cola Europacific Partners (DI) (CCEP) 6,710.00p 1.05%
JD Sports Fashion (JD.) 88.74p 0.98%
Sainsbury (J) (SBRY) 289.80p 0.98%
Babcock International Group (BAB) 1,148.00p 0.97%
British American Tobacco (BATS) 3,463.00p 0.96%

FTSE 100 - Fallers

Intermediate Capital Group (ICG) 1,928.00p -4.17%
Barratt Redrow (BTRW) 455.90p -3.80%
Persimmon (PSN) 1,296.00p -3.79%
Croda International (CRDA) 2,924.00p -3.11%
Taylor Wimpey (TW.) 118.75p -2.98%
Experian (EXPN) 3,752.00p -2.72%
Spirax Group (SPX) 5,955.00p -2.38%
Hikma Pharmaceuticals (HIK) 1,988.00p -1.88%
Rentokil Initial (RTO) 352.10p -1.84%
Mondi (MNDI) 1,189.50p -1.82%

FTSE 250 - Risers

Indivior (INDV) 1,084.00p 9.94%
Foresight Group Holdings Limited NPV (FSG) 443.50p 4.60%
W.A.G Payment Solutions (WPS) 87.40p 4.05%
SDCL Efficiency Income Trust (SEIT) 56.10p 3.31%
Burberry Group (BRBY) 1,182.00p 2.78%
Drax Group (DRX) 693.00p 2.67%
Carnival (CCL) 1,829.00p 2.64%
Endeavour Mining (EDV) 2,228.00p 2.39%
IntegraFin Holding (IHP) 326.00p 2.19%
NCC Group (NCC) 145.00p 2.11%

FTSE 250 - Fallers

Man Group (EMG) 169.10p -4.62%
Pantheon Infrastructure (PINT) 100.50p -4.29%
Crest Nicholson Holdings (CRST) 186.70p -4.11%
Ibstock (IBST) 146.20p -3.82%
Vistry Group (VTY) 638.00p -3.80%
PRS Reit (The) (PRSR) 108.20p -3.74%
C&C Group (CDI) (CCR) 162.80p -3.67%
WH Smith (SMWH) 1,090.00p -3.45%
Wickes Group (WIX) 224.50p -3.23%
Bellway (BWY) 2,884.00p -3.22%