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London open: Stocks drop amid global slowdown concerns
London stocks fell in early trade on Wednesday, taking their cue from downbeat sessions in the US and Asia amid worries about a global slowdown.
At 0830 BST, the FTSE 100 was 0.9% weaker at 7,297.63, while the pound was down 0.3% against the dollar at 1.2263 and 0.2% lower versus the euro at 1.1230 as Prime Minister Boris Johnson was set to address the Tory conference before submitting his new Brexit proposals to the EU.
Neil Wilson, chief market analyst at Markets.com, said: “The final tabled offer will fall short of what the EU requires. It will be rejected. Boris knows this – the only narrative that matters is the one that shows the will of the people being frustrated by recalcitrant MPs and perfidious foreigners.
“The PM will ‘sell’ this pup to the Tory faithful in his conference speech but it’s all optics. He knows it won’t wash with either the EU or Parliament. What the market needs to know now is: does Boris circumvent the Benn bill, and how?”
More broadly, worries about a global slowdown weighed on investors’ minds after the release of dismal US manufacturing data on Tuesday. The ISM manufacturing index dropped to 47.8 in September from 49.1 in August, missing expectations and hitting it weakest level in a decade.
CMC Markets analyst David Madden said: “Earlier on in the week we saw the official Chinese manufacturing PMI report remained in contraction territory. Yesterday we saw the final reading of manufacturing PMI reports from major European countries, and it is clear that manufacturing in the Continent is also in contraction territory. The German and the UK readings were 41.7 and 48.3 respectively. The French manufacturing sector is barely expanding as the reading was 50.1.
“Looking at the broader picture, it is fair to say that the worldwide manufacturing sector is in trouble. The US-China trade spat is having a knock-on effect around the globe, hence why we saw a sharp move lower in stocks yesterday.”
In corporate news, Tesco was in the red after the supermarket retailer announced the departure of chief executive Dave Lewis alongside its interim results, as the company said its turnaround was complete.
Neil Wilson said Tesco had “dropped a bombshell” on investors with the news on Lewis.
“Half year profits were up 25% at £1.4bn – this is largely due to cost cutting,” said Wilson. “But it’s a big blow for Tesco to lose Lewis…It’s hard to underestimate the impact Lewis has had on Tesco as he turned the supertanker around after a run of poor results and an accounting scandal.”
Standard Life Aberdeen was also on the back foot as it said vice chairman Martin Gilbert was set retire, while Auto Trader edged down after announcing the acquisition of auto industry software group KeeResources for an undisclosed sum.
Marks & Spencer was knocked lower by a downgrade to ‘hold’ at Peel Hunt, while Hastings was hit by a downgrade to ‘underperform’ at RBC Capital Markets.
On the upside, Flutter Entertainment, formerly Paddy Power, surged as it agreed an all-share merger with Nasdaq and Toronto-listed Stars Group, a provider of technology-based product offerings in the global gaming industries. William Hill and GVC Holdings also rallied.
