London midday: Stocks maintain gains; business output contracts

London stocks were still in the black by midday on Friday as investors mulled an improvement in consumer confidence, but a contraction in UK business output and a bigger-than-expected drop in retail sales.

The FTSE 100 was up 0.7% 8,202.28.

A survey out earlier showed that business output contracted in November for the first time in more than a year.

S&P Global’s flash UK composite output index - which measures activity in both the manufacturing and services sectors - fell to 49.9 from 51.8 in October. This marked the lowest level since October 2023 and was below the 50.0 mark that separates contraction from expansion.

The flash manufacturing purchasing managers’ index declined to 48.6 in November from 49.9 a month before, hitting a nine-month low.

Meanwhile, the services PMI business activity index printed at 50.0, versus 52.0 in September, and a 13-month low.

Chris Williamson, chief business economist at S&P Global Market Intelligence said: "The first survey on the health of the economy after the Budget makes for gloomy reading. Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months. Although only marginal, the downturns in output and hiring represent marked contrasts to the robust growth rates seen back in the summer and are accompanied by deepening concern about prospects for the year ahead.

"Business optimism has slumped sharply since the General Election, dropping further in November to hit the lowest since late 2022. Companies are giving a clear 'thumbs down' to the policies announced in the Budget, especially the planned increase in employers' National Insurance contributions.

"The November PMI is indicative of the economy slipping into a modest decline, with GDP dropping at a 0.1% quarterly rate, but the loss of confidence hints at worse to come - including further job losses - unless sentiment revives."

Investors were also digesting the latest data from the Office for National Statistics, which showed that retail sales fell more than expected in October amid uncertainty ahead of the Budget.

Retail sales fell by 0.7% on the month in October following a 0.1% increase the month before. Economists had been expecting a 0.3% decline. September’s gain was revised down from 0.3%.

Non-food stores sales volumes fell by 1.4% in October following a 2.3% jump in September and the ONS said that retailers across a range of industries suggested that low consumer confidence and uncertainty around the Budget had affected sales.

Sales at clothing stores were particularly weak, dropping 3.1% on the month.

ONS senior statistician Hannah Finselbach said: "Retail sales fell back in October following three months of growth. The fall was driven by a notably poor month for clothing stores, but retailers across the board reported consumers held back on spending ahead of the Budget.

"However, when we look at the wider trend, retail sales are increasing across the three month and annual periods, although they remain below pre-pandemic levels."

Also on Friday, a long-running survey showed that consumer confidence jumped in November, after uncertainty seen in the run-up to the Budget eased.

In equity markets, Warhammer maker Games Workshop surged as it lifted half-year guidance after trading in the last two months exceeded expectations.

The company forecast pre-tax profit of at least £120m for the six months to 31 December, compared with £96.1m a year earlier. Core revenue was estimated at not less than £260m and licensing revenue of at least £30m.

Clarksons shares rallied as Berenberg started coverage of the shipping services firm with a ‘buy’ rating and 5,075p price target.

On the downside, banks were among the worst performers, with Barclays, Standard Chartered, NatWest, Lloyds and HSBC all lower.

JD Sports Fashion was a touch weaker, having tumbled on Thursday after it warned that full-year profits would be at the lower end of forecasts after a "volatile" trading environment in October due to bigger discounts, milder weather and consumer caution ahead of the US election.

In a research note on Friday, JPMorgan Cazenove downgraded its rating on the shares to ‘neutral’ from ‘overweight’ following the results. It said that with a high level of earnings uncertainty and no clear catalyst to drive upside, the shares are likely to struggle to recover over the coming months.

Market Movers

FTSE 100 (UKX) 8,202.28 0.65%
FTSE 250 (MCX) 20,525.85 0.86%
techMARK (TASX) 4,678.27 0.99%

FTSE 100 - Risers

B&M European Value Retail S.A. (DI) (BME) 355.20p 4.78%
Vistry Group (VTY) 646.50p 3.52%
Diploma (DPLM) 4,366.00p 3.41%
Sainsbury (J) (SBRY) 254.80p 3.24%
National Grid (NG.) 994.00p 3.13%
Spirax Group (SPX) 6,710.00p 3.07%
Barratt Redrow (BTRW) 414.60p 2.96%
Persimmon (PSN) 1,275.00p 2.78%
United Utilities Group (UU.) 1,142.00p 2.65%
Land Securities Group (LAND) 609.00p 2.61%

FTSE 100 - Fallers

Barclays (BARC) 253.80p -3.35%
Standard Chartered (STAN) 932.40p -2.75%
NATWEST GROUP (NWG) 391.70p -2.20%
JD Sports Fashion (JD.) 93.48p -2.12%
Lloyds Banking Group (LLOY) 54.06p -1.74%
HSBC Holdings (HSBA) 720.20p -0.92%
CRH (CDI) (CRH) 7,942.00p -0.80%
International Consolidated Airlines Group SA (CDI) (IAG) 244.50p -0.77%
Glencore (GLEN) 378.85p -0.73%
M&G (MNG) 200.50p -0.69%

FTSE 250 - Risers

Games Workshop Group (GAW) 13,650.00p 16.57%
Clarkson (CKN) 3,825.00p 6.53%
Ithaca Energy (ITH) 113.70p 4.31%
Victrex plc (VCT) 890.00p 3.13%
Endeavour Mining (EDV) 1,608.00p 3.08%
Auction Technology Group (ATG) 441.50p 3.03%
Pennon Group (PNN) 602.50p 2.64%
Wizz Air Holdings (WIZZ) 1,308.00p 2.59%
Bellway (BWY) 2,504.00p 2.54%
ITV (ITV) 63.60p 2.50%

FTSE 250 - Fallers

Close Brothers Group (CBG) 202.80p -5.41%
CMC Markets (CMCX) 274.00p -5.03%
W.A.G Payment Solutions (WPS) 81.00p -4.71%
IP Group (IPO) 41.05p -2.38%
Investec (INVP) 600.00p -1.88%
SDCL Energy Efficiency Income Trust (SEIT) 51.50p -1.53%
Bank of Georgia Group (BGEO) 4,880.00p -1.41%
TP Icap Group (TCAP) 261.50p -1.32%
Fidelity China Special Situations (FCSS) 209.00p -1.18%
Raspberry PI Holdings (RPI) 329.50p -1.05%