London midday: Stocks fall after GDP data; Covid worries weigh
London stocks had fallen a little further into the red by midday on Tuesday after the release of weaker-than-expected GDP figures and amid ongoing concerns about the coronavirus pandemic.
The FTSE 100 was 0.4% lower at 6,202.99, while sterling was down 0.1% against the dollar at 1.2281. Despite the downbeat tone, the top-flight index was on course for its best quarter since 2010.
Data released earlier by the Office for National Statistics showed the economy recorded its largest contraction in more than four decades in the first quarter of 2020, as consumers cut spending in the first few days of the coronavirus lockdown.
Gross domestic product fell by a more-than-expected 2.2% in the largest fall since the third quarter of 1979. The ONS had previously estimated a 2% drop but revised its figure after data showed a record 6.9% plunge in March.
But with the data only showing nine days of the lockdown, the second quarter was expected to show the pandemic’s full impact on the economy.
The Bank of England earlier this month warned the economy may have contracted by 20% in the first half of 2020.
EY ITEM Club chief economic adviser Howard Archer said it was "evident that the UK economy witnessed a record GDP contraction in the second quarter", forecasting a 17% slump quarter-on-quarter.
"The EY ITEM Club also expects the economy to return to clear growth in the third quarter with GDP expanding close to 10% quarter-on-quarter. This assumes a further gradual easing of lockdown restrictions across the UK," he said.
Meanwhile, worries about the Covid-19 crisis continued to weigh on investors’ minds as Leicester became the first city in England to be put under a local lockdown after a surge in new coronavirus infections, with non-essential retailers and school closed again.
In equity markets, Shell was under pressure as it said it expects to take a $20bn to $27bn hit to second quarter pre-tax profits from impairments after revising its outlook for commodity prices and margin outlook amid the pandemic. BP was also on the back foot.
IG analyst Chris Beauchamp said: "In a world of falling oil demand and a bigger push towards renewables, these energy titans increasingly look like creatures from another era, something which should give investors pause for thought.
"While neither Shell nor BP will be going anywhere soon, their importance as dividend payers will likely diminish relative to other sectors, and yield-hungry investors need to be prepared for this eventuality."
InterContinental Hotels dipped as it said revenue per available room fell 75% in the second quarter but that the trend was improving and 90% of its hotels were now open.
Housebuilder Redrow slid as it said annual profits would be "substantially" lower after scaling back its London operations and factoring in the impact of Covid-19.
Rotork was under the cosh after it said group order intake in the first half will be between 16% and 18% lower than the previous year's £362m on an organic constant currency basis, while revenue will be 11% to 13% lower on the year.
Shares of gold miner Petropavlovsk fell sharply as it announced the appointment of four temporary directors to the board and a new chief executive officer.
In broker note action, RELX and Kingfisher were dented by rating downgrades at Exane and Investec, respectively.
On the upside, Smiths Group rallied as it said it would cut jobs as part of a plan to reduce costs by £70m as the engineering company reported a slowdown in business because of Covid-19. CMC Markets analyst David Madden said traders have welcomed "the proactive stance" the firm is taking.
Standard Life Aberdeen was up after saying that chief executive officer Keith Skeoch was stepping down, to be replaced by Stephen Bird, who was CEO of global consumer banking at Citigroup.
FTSE 100 - Risers
Smiths Group (SMIN) 1,392.50p 7.28%
Standard Life Aberdeen (SLA) 277.10p 4.21%
Ferguson (FERG) 6,614.00p 2.29%
M&G (MNG) 168.70p 2.06%
Informa (INF) 471.00p 1.40%
Legal & General Group (LGEN) 221.60p 1.28%
Scottish Mortgage Inv Trust (SMT) 820.00p 1.23%
Admiral Group (ADM) 2,328.00p 1.22%
Rightmove (RMV) 551.60p 1.21%
Burberry Group (BRBY) 1,601.50p 1.17%
FTSE 100 - Fallers
Hikma Pharmaceuticals (HIK) 2,203.00p -2.87%
Royal Dutch Shell 'A' (RDSA) 1,308.00p -2.37%
Royal Dutch Shell 'B' (RDSB) 1,247.00p -1.87%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,482.00p -1.71%
BP (BP.) 310.05p -1.54%
International Consolidated Airlines Group SA (CDI) (IAG) 227.10p -1.52%
BAE Systems (BA.) 488.40p -1.47%
Auto Trader Group (AUTO) 527.20p -1.46%
Standard Chartered (STAN) 432.90p -1.43%
HSBC Holdings (HSBA) 379.50p -1.38%
FTSE 250 - Risers
Energean (ENOG) 620.00p 14.39%
Royal Mail (RMG) 181.25p 5.26%
Spirent Communications (SPT) 242.00p 4.99%
Carnival (CCL) 964.40p 4.94%
Cineworld Group (CINE) 59.90p 4.50%
WH Smith (SMWH) 1,093.00p 4.29%
888 Holdings (888) 174.00p 4.19%
Rathbone Brothers (RAT) 1,444.00p 4.03%
Drax Group (DRX) 264.80p 3.76%
Unite Group (UTG) 953.00p 3.14%
FTSE 250 - Fallers
Petropavlovsk (POG) 27.45p -11.45%
AO World (AO.) 136.80p -6.43%
Hammerson (HMSO) 81.52p -5.36%
Redrow (RDW) 440.20p -4.80%
Equiniti Group (EQN) 147.40p -3.15%
BMO Commercial Property Trust Limited (BCPT) 61.30p -3.01%
Liontrust Asset Management (LIO) 1,335.00p -2.91%
TUI AG Reg Shs (DI) (TUI) 378.00p -2.88%
XP Power Ltd. (DI) (XPP) 3,480.00p -2.79%
Go-Ahead Group (GOG) 846.50p -2.76%
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