The FTSE 100 opened July in the red, falling over 50 points before trimming losses to sit around 37 points lower at 10,460 as global markets adopted a cautious tone.
Associated British Foods (ABF) led the blue-chip fallers after warning that weaker sugar trading will hit profits this year, with sugar expected to make a larger adjusted operating loss of between £25 million and £60 million.
The company blamed lower European sugar prices, higher gas costs linked to the Middle East conflict, and uncertainty across its operations in Africa for the deterioration.
Primark, owned by ABF, posted mixed third-quarter results, with like-for-like sales shrinking 2.2% in the 16 weeks to 20 June, though total sales rose 4% to £2.9 billion thanks to new store openings and currency movements.
ABF chief executive George Weston said: “Aside from Sugar, our full year outlook for the group is unchanged.”
JD Sports fell 2.7% after major partner Nike reported continued struggles and flat revenue overnight, adding to the pressure on the London index’s consumer names.
Defence stocks provided a rare bright spot, with Babcock climbing 5% as analysts flagged the sector as a key beneficiary of the government’s newly confirmed Defence Investment Plan, which sets out £15 billion of extra funding over four years.
Jefferies analyst David Farrell said there are “some positives” for UK defence companies even though the extra money sits against a reported £28 billion funding shortfall, highlighting opportunities for Babcock, BAE Systems, Chemring, Rolls-Royce and Cohort.
On the mid-cap FTSE 250, CMC Markets rocketed 40% higher after the online broker upgraded its profit outlook, standing out as one of the session’s most dramatic moves.
Across the Atlantic, Meta was the biggest riser on the S&P 500, surging over 10% on a Bloomberg report that the Instagram owner plans to sell spare computing power to third parties.
US markets opened lower overall, with the Nasdaq falling 0.9%, the S&P 500 sliding 0.5% and the Dow Jones retreating 0.3% from its recent record high, led by weakness in chip and hardware names.
Storage and memory stocks bore the brunt of the selling, with SanDisk down 7.8%, Micron and Seagate both off over 6%, and Nvidia declining 2.8% as investors trimmed positions after a stellar first half of the year.
New Federal Reserve chairman Kevin Warsh spoke at the ECB’s central bankers’ conference in Sintra, telling markets that policymakers would wait for more data while stressing the central bank would defend its independence in the fight against inflation.
Warsh said inflation risks and expectations had eased in recent weeks but stopped short of giving investors enough clarity to significantly shift rate hike bets, leaving this week’s US jobs data as the next major test for markets.
Asked whether markets are in bubble territory, Warsh said: “I’m not prepared to sort of make a broad comment denoting risks that are available in the system, but I will say this: this is the biggest time of consequence to each of our economies, I think in our lifetime.”
On productivity, Warsh added: “If the last four quarters are an indication, there is reason to be optimistic.”
Market analyst Kathleen Brooks at XTB noted that the Dow Jones had its best first half of the year in six years, while the Nasdaq closed out its fourth best quarter ever, cautioning that these moves “are unusual, so should we expect them to continue?”
UK house prices were flat month-on-month in June, rising 2.2% year-on-year according to Nationwide, with chief economist Robert Gardner warning that consumer confidence and housing sentiment had weakened as energy prices rose.
NatWest completed its £2.7 billion acquisition of Evelyn Partners, creating what the bank described as the UK’s biggest private banking and wealth management business, with £127 billion of assets under management and administration.
Peel Hunt warned that UK-listed companies are being bought at an alarming pace, with head of research Charles Hall writing that “to say that the UK has a problem in retaining its companies and listing new ones would be a massive understatement”, citing 29 active bids this year worth £61 billion.