Monday's rally quickly become a distant memory for stocks in London as fresh recession fears and a resulting fall in oil prices caused a sharp fall into the red.

The FTSE 100 index closed down 207.18 points, or 2.9%, at 7,025.47. The FTSE 250 ended down 277.64 points, or 1.5%, at 18,322.94 and the AIM All-Share closed down 7.56 points, or 0.9%, at 867.46.

The Cboe UK 100 ended down 3.0% at 700.20, the Cboe UK 250 closed down 1.8% at 15,891.59, and the Cboe Small Companies ended down 1.3% at 13,115.58.

In Paris the CAC 40 ended down 2.7%, while the DAX 40 in Frankfurt ended down 2.9%.

In the FTSE 100, Dechra Pharmaceuticals ended the best performer, up 5.4%, after RBC raised the veterinary products company to 'outperform' from 'sector perform'.

J Sainsbury closed up 1.3% even as the supermarket chain posted a slip in first quarter sales.

Sainsbury's said grocery sales in the first quarter ended June 25 fell 2.4% yearly ‘against last year's elevated Covid-19 driven levels’. On three years earlier, prior to the onset of the pandemic, grocery sales were 8.7% higher.

Total retail sales, excluding fuel, were down 4.5% yearly. Including fuel, they were down 4.0%.

Looking ahead, Sainsbury's backed its profit outlook as it continues to expect underlying pretax profit of between £630 million and £690 million. It had reported underlying pretax profit of £730 million in financial 2022, so it expects a decline of as much as 14%.

At the other end of the large-caps, energy stocks ended among the worst performers, tracking spot oil prices lower. BP closed down 7.2%, Shell down 8.7% and Harbour Energy down 9.6%.

Brent oil was quoted at $105.18 a barrel at the equities close, sharply lower from $113.66 at the close Monday.

Separately, Shell said it, alongside the United Co for Industry have signed a deal with Saudi Aramco for the construction and operation of a Metals Reclamation Complex, for recovering and recycling metals in Al-Jubail industrial city, Saudi Arabia.

The United Co for Industry is part of the Aljomaih Group of Companies, a Saudi Arabian industrial group. United Co in particular invests in manufacturing assets to support the development of advanced downstream industries.

Also on Tuesday, the FTSE 100 oil major announced that it has been picked by QatarEnergy as a partner in the $29 billion North Field East expansion project in Qatar, currently the largest liquefied natural gas project.

The pound was quoted at $1.1900 at the London equities close, down from $1.2114 at the close Monday, despite positive UK economic data.

The latest S&P Global/CIPS UK services purchasing managers' index expanded to 54.3 points in June, from 53.4 in May. It was the sixteenth successive month in which the index has registered above the 50.0 mark, which separates growth from decline. The final June figure was above the 53.4 flash estimate.

The euro stood at $1.0240 at the European equities close, plunging from $1.0430 late Monday. The common currency for the euro area fell to an intraday low of $1.0237 in afternoon trade - its lowest level since late 2002 after disappointing purchasing managers' index data from the continent.

The eurozone's private sector growth slowed in June, succumbing to weaker demand and falling confidence.

The S&P Global eurozone composite PMI fell to 52.0 points in June from 54.8 in May. The tally remained above the 50.0 no change threshold, though the figure suggests private sector growth has eased. The pace of the expansion was ‘modest overall’, S&P Global said.

‘Stalling demand conditions and weaker activity growth were reflected in a further dampening in business confidence amongst eurozone firms. The level of sentiment was the weakest since October 2020 and subdued in the context of historical data,’ S&P Global said.

‘On the price front, cost burdens surged further, albeit with the rate of inflation retreating further from March's peak. Consequently, charges levied rose at a slightly reduced pace, but one that was nonetheless marked.’

The eurozone services purchasing managers' index reading alone fell to 53.0 in June from 56.1 in May, figures showed.

In addition, the single currency also dived as investors eyed aggressive interest rate hikes by the US Federal Reserve in its fight against inflation, in contrast with the European Central Bank which plans more modest increases amid fears the bloc could fall into recession.

Against the yen, the dollar was trading at JP¥135.90, up from JP¥135.72 late Monday.

Stocks in New York were in the red at the London equities close following the long holiday weekend in the US. The DJIA was down 2.2%, the S&P 500 index down 1.9% and the Nasdaq Composite down 1.0%.

On Wall Street, Tesla fell 3.6% after Elon Musk's electric vehicle maker reported disappointing second-quarter auto deliveries due to a weeks-long closure of its factory in China.

Gold stood at $1,767.88 an ounce at the London equities close, lower against $1,808.30 late Monday.

The economic events calendar on Wednesday has US services PMI at 1445 BST and the US Federal Reserve meeting minutes at 1900 BST.

The UK corporate calendar on Wednesday has annual results from Redde Northgate. There are also trading statements from Robert Walters and Topps Tiles.

Copyright 2022 Alliance News Limited. All Rights Reserved.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account.

Issue Date: 05 Jul 2022