UK stocks fell sharply after heavy overnight falls in the US and Asia as inflation concerns hammered technology stocks.
The Nasdaq 100 index fell more than 2.5%, prompting a 3% fall in Japan’s Nikkei index and a 3.7% fall in the Taiwan stock market. US futures are still pointing to the downside with Nasdaq indicated down a further 1.4%.
Within 30 minutes of the open the FTSE 100 had fallen 2% or 150 points to 6,973 - back below the 7,000 level, which it had spent so long trying to conquer – with miners, banks and travel stocks doing the damage.
Sterling held its ground at $1.41, creating headwinds for export-oriented firms, while Brent crude prices dipped to $67.80 per barrel. In contrast, gold was largely unchanged at $1,834 per ounce.
Contributing to the market weakness, shares in NatWest Group (NWG) dropped 3.5% to 190.5p after the UK government sold a 5% chunk of the shares at 190p, cutting its stake in the taxpayer-backed lender to below 55%.
The sale of 580 million shares raised £1.1 billion for the Treasury and is the first sale direct to outside investors since 2018. In March the bank repurchased a 4.86% stake at 190.5p with the intention of cancelling most of the shares.
Meanwhile, supermarket group Morrison (MRW) was one of the few gainers after it reported solid sales growth in its first quarter to 9 May with like-for-like group sales excluding fuel up 2.7% on the same period last year and up 8.7% on the same period in 2019.
The main drivers were online sales, which climbed 113%, and wholesale revenues which were 21% higher on a like-for-like basis thanks to increased distribution to McColl’s stores.
The company kept its full year pre-tax profit guidance of at least £431 million and said it expected ‘meaningful growth’ in earnings for the 2022-23 financial year. Shares added 0.5% to 184p.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped from £0.7 million to £5.7 million and earnings per share were 3.33p compared with a prior-year loss of 2p.
The retailer also flagged a 54% rise in sales in the first quarter to April helped in no small measure by the re-opening of its stores with retail revenues up 75%. Shares added 4.7% to a post-pandemic high of 89p.
Continuing the trend of recent days, more small-cap firms raised their full year outlook after better than expected trading since the start of the year.
Thanks to strong sales on its digital platform, combined with a stronger than expected contribution from its stores since re-opening and an ‘encouraging’ performance at the recently-acquired Garden Trading unit, sales and pre-tax profits are expected to top consensus forecasts of £187 million and £4.1 million respectively.
Despite only a third of its bars being open, shorter trading hours, and outdoor covers at those venues only making up 15% of their capacity, total sales were down just over 50% on the same period, reflecting strong pent-up demand.
Given the improvement in trading and continued tight cost control, the group now expects its results for the year to June to be ahead of management expectations. Shares gained 4% to 32p in response.
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