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London stocks remained under pressure by midday on Wednesday, with the FTSE 100 down 0.6% at 8,247.85. The decline was influenced by disappointing US manufacturing data, which reignited concerns about the state of the US economy, and significant losses for Nvidia, which further dampened market sentiment.
Russ Mould, an investment director at AJ Bell, noted that the weaker-than-expected US manufacturing figures acted as a catalyst, pushing markets lower amid renewed concerns over economic strength. He pointed out that market pullbacks are not uncommon after periods of volatility, like the one experienced over the summer. Additionally, reports that the US Justice Department had issued subpoenas to Nvidia and other companies as part of an antitrust investigation into AI chips added to the negative market atmosphere.
Despite the gloomy mood in global markets, there was some positive news on the UK economic front. A recent survey showed that business activity in the UK picked up in August at its fastest pace since April. The S&P Global PMI composite output index rose to 53.8 from 52.8 in July, while the services PMI business activity index increased to 53.7 from 52.5. This marked the tenth consecutive month of growth, with the index staying above the neutral 50.0 level, which separates contraction from expansion.
Tim Moore, economics director at S&P Global Market Intelligence, commented that the data reflected a recovery in the UK service sector, driven by improving economic conditions and domestic political stability. He highlighted that new business increased at a robust pace, fueling the fastest growth in service sector activity since April. Service providers also responded to better business conditions by hiring more staff in August, although challenges such as scarce candidate availability and high wage pressures persisted. However, the rate of input price inflation eased to its lowest level since January 2021, and the pace of price increases for services slowed to a three-and-a-half-year low.
In the equity markets, housebuilder Barratt Developments (LSE:BDEV) fell sharply after reporting a significant drop in annual profit due to cost-of-living pressures, higher mortgage rates, and weak consumer confidence. Segro (LSE:SGRO) also declined following its agreement to acquire Tritax EuroBox in a deal valued at around £1.1 billion, including debt. Hilton Food saw a dip despite reporting a rise in interim adjusted operating profit, and Direct Line (LSE:DLG) edged lower after its half-year operating profit fell short of expectations.
Airtel Africa (LSE:AAF) experienced a steep decline after being downgraded by JPMorgan, and Centrica lost ground following a downgrade by HSBC. DS Smith (LSE:SMDS) was affected by a downgrade from Stifel, while Compass Group saw slight gains after an upgrade by BNP Paribas Exane. Balanced Commercial Property Trust saw a notable jump after agreeing to be acquired by private investment firm Starwood Capital for £673.5 million.
