More leaks have been found in the pipeline bringing Russian gas to Europe, scuppering what had promised to be a positive open for stock markets.
‘There are two leaks on the Swedish side and two leaks on the Danish side,’ a Swedish Coast Guard official said, after three leaks were confirmed earlier this week on the Nord Stream pipelines in the Baltic Sea.
Suspicions of sabotage emerged after the leaks were detected. Moscow denied it was behind the explosions, as did the US, saying Moscow's suggestion it would damage the pipeline was ‘ridiculous’.
In London, bellwether retailer Next lowered its sales and profit guidance, further darkening the investment mood.
The FTSE 100 index was down 141.06 points, or 2.0%, at 6,864.33 early Thursday. The mid-cap FTSE 250 index was down 326.46 points, or 1.9%, at 16,994.51. The AIM All-Share index was down 5.03 points, or 0.3%, at 808.95.
The Cboe UK 100 index was down 1.9% at 685.87. The Cboe 250 also was down 2.0%, at 14,528.77, and the Cboe Small Companies was down 0.2% at 12,674.97.
The CAC 40 stock index in Paris slumped 1.0% early Wednesday, while the DAX 40 in Frankfurt was down 0.9%.
The Nikkei 225 in Tokyo closed up 1.0%, while the S&P/ASX 200 in Sydney surged 1.4%.
However, in China, the Shanghai Composite closed 0.1% lower, having been up 1.0% in earlier dealings. The Hang Seng in Hong Kong was down 0.9% shortly before the close of play, having earlier traded up 1.9%.
Investor mood had been boosted on Wednesday after the Bank of England announced a move to intervene to calm wild UK gilt markets.
The UK central bank on Wednesday said it will buy up long-dated government bonds to ‘restore orderly market conditions’.
‘The surprise intervention from the BoE gave an energy boost to the markets yesterday, proving once again how the markets are addicted to the central bank money, and how they are depressed without it,’ Swissquote analyst Ipek Ozkardeskaya commented.
‘Yesterday's price action was a sugar rush, triggered by the BoE intervention. Enthusiasm will likely fall as the level of blood sugar falls across the financial markets.’
The pound was up on Thursday morning, but remained below the $1.08 mark. Sterling fetched $1.0787 early Thursday, firm from $1.0763 at the London equities close on Wednesday. It had fallen to $1.0540 on Wednesday, shortly after the BoE announced it would buy long-dated gilts.
The euro rose to $0.9656 early Thursday from $0.9645 on Wednesday. Against the yen, the dollar rose to JP¥144.74 from JP¥144.41.
In London, Next shares slid 9.8%, among the worst large-cap performers.
The clothing and homewares retailer knocked annual guidance as it believes tough trading in August and cost-of-living pressures will offset any boost from recent UK government stimulus measures.
Full price sales advanced 12% year-on-year in the first half ended July 30, though the company now expects a decline for the second half. Full price sales are to shrink by 1.5% year-on-year.
It had previously guided for 1% growth. Next also lowered bottom-line guidance. It now expects annual pretax profit of £840 million, down from the previous £860 million guidance, but up 2.1% on last year.
Half-year revenue climbed 12% to £2.38 billion from £2.12 billion a year earlier. Pretax profit advanced 16% year-on-year to £400.6 million from £346.7 million.
Peel Hunt cut its financial 2023 and 2024 forecasts for Next in response to the guidance reduction. However, the broker said the interim results were in line with its own expectations, and it kept Next shares at 'buy'.
‘On 10x [price-earning ratio], the shares are not highly valued.’ Peel Hunt said. ‘The business remains the UK platform of choice for many households, efforts to drive margins higher, a more efficient supply chain and a better customer journey should continue to drive the group's top quartile [return on capital employed] and returns.’
Synthomer also lowered guidance. The Essex-based chemicals maker was the worst FTSE 250 performer, with the stock down 28%.
It now expects its 2022 earnings before interest, tax, depreciation and amortisation to be 10% to 15% below previous expectations.
‘Since August, macroeconomic conditions have deteriorated, leading to reduced demand in construction and coatings end markets. This has impacted trading in Synthomer's European business,’ the company warned.
Another stock to slide was All Bar One-owner Mitchells & Butlers. Its shares were down 3.9%.
The pub chain welcomed UK energy price cap measures but warned it expects its total energy and utility costs to have risen to £150 million for the full year, up from the pre-pandemic comparative of £80 million.
‘Even with the cap in place, [we] anticipate a further increase on that for FY 2023,’ it warned.
Fourth-quarter sales topped pre-virus levels, however, despite the pub and bar owner facing extreme hot weather in the UK and rail strikes. In the quarter ended September 24, total sales rose 1.5% from three years earlier, before the onset of the pandemic.
Elsewhere in London, Avon Protection rose 4.3%. The personal protection company has received a first delivery order from the US Army for a ‘next generation’ helmet. The order is worth $42.1 million.
AIM-listed HSS Hire added 3.9%. The tool and equipment rental firm reinstated its interim dividend with a 0.17 pence per share payout.
In the half-year ended July 2, revenue rose 9.3% annually to £159.9 million from £146.3 million. HSS Hire's pretax profit, however, declined to £6.5 million from £6.8 million.
Attraqt was the standout performer on London's junior market, however, surging 66% to 29.00 pence, giving it a market capitalisation of £58.5 million.
Attraqt backed a £63.2 million takeover offer. Technology company Crownpeak will pay 30p cash per share in the London-based provider of online search, merchandising and personalisation solutions for e-commerce.
Gold traded at $1,643.24 an ounce, down from $1,653.20. Brent oil fell to $87.70 a barrel from $88.17.
In the international economic events calendar on Thursday, there is a eurozone consumer confidence reading at 1000 BST, followed by a German inflation at 1300 BST and US gross domestic product and core personal consumption expenditures at 1330 BST.
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