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London stocks declined by midday on Tuesday as market participants assessed the latest UK retail sales figures and prepared for important US economic data releases.
The FTSE 100 index fell by 0.6%, settling at 8,317.87. Focus remains on the manufacturing sector, with the US ISM manufacturing PMI scheduled for release later in the day. This follows a troubling dip in July’s metric, which reached an eight-month low. Joshua Mahony, chief market analyst at Scope Markets, noted the critical nature of the sector’s performance, highlighting concerns over rising prices coupled with reduced output—a situation the Federal Reserve will likely aim to address swiftly.
In addition, market attention is shifting towards Friday’s jobs report, with participants looking for further indications of potential economic slowdowns. This follows a surprising increase in unemployment, which recently hit its highest rate since October 2021. The trajectory of unemployment will be pivotal in shaping future expectations for Federal Reserve policies.
The ISM manufacturing PMI for August is due at 1500 BST, preceded by the S&P Global manufacturing PMI at 1445 BST.
On the domestic front, August’s retail sales data showed a year-on-year increase, although growth was relatively modest given strong comparatives from 2023. The British Retail Consortium-KPMG Retail Sales Monitor reported a 1% rise in UK retail sales, slightly above the three-month average of 0.4%, but below the 12-month average of 1.2%. Food sales saw a 2.9% increase over the three months leading to August, compensating for a 1.7% decline in non-food sales.
BRC chief executive Helen Dickinson commented that growth in August was driven by food sales for social gatherings and summer-related products, while back-to-school sales were weaker, with some families opting for second-hand items.
In equity markets, Rolls-Royce (LSE:RR) emerged as a notable gainer. The company had experienced a decline on Monday following Cathay Pacific’s temporary grounding of its A350 fleet due to issues with Rolls-Royce engines. On Tuesday, Cathay Pacific reported that three of the 48 inspected planes had been repaired, with all expected to return to service by Saturday. Russ Mould of AJ Bell highlighted that although the share price rebound is positive, concerns about the incident and potential further issues remain.
Ashtead (LSE:AHT) saw a boost after reporting a first-quarter profit drop in line with expectations, while Hikma (LSE:HIK) benefited from a rating upgrade to ‘buy’ from ‘hold’ by Berenberg. Watches of Switzerland also advanced as it reaffirmed its annual guidance, citing strong demand for luxury brands in both the UK and US markets.
