Retailers were leading stock market losses in London on Friday, after weak UK retail sales and consumer confidence reports and a warning from German sportswear maker Adidas.

The FTSE 100 index was down 61.54 points, 0.9%, at 6,882.37 at midday. The FTSE 250 was down 302.52 points, 1.7%, at 17,086.41, and the AIM All-Share was down 4.05 points, 0.5%, at 782.39.

The Cboe UK 100 was down 0.9% at 687.60, the Cboe UK 250 was down 1.8% at 14,579.92, and the Cboe Small Companies was down 0.4% at 12,228.02.

Following the resignation of Liz Truss, the Conservative Party now begins the process to select a new leader, with the result to be announced no later than next Friday.

Amongst those believed to be in the running are former chancellor Rishi Sunak, leader of the house Penny Mourdaunt, and even former PM Boris Johnson.

‘With recession now inevitable there are huge problems for the government to overcome once it deals with the little issue of who will walk through, what’s become of late, the revolving door at Number 10,’ said AJ Bell’s Danni Hewson.

Meanwhile, UK Chancellor Jeremy Hunt has vowed to do ‘whatever necessary’ to drag government debt lower after official figures revealed that borrowing swelled to £20 billion in September.

The Office for National Statistics reported that a jump in debt interest grew borrowing beyond the expectations of economists, laying bare the challenge facing the chancellor and new prime minister ahead of the fiscal event at the end of this month.

The ongoing economic uncertainty piled pressure on sterling. The pound was quoted at $1.1102 at midday on Friday, compared to $1.1294 at the London equities close on Thursday.

In the FTSE 100, athleisure retailer JD Sports and Sports Direct owner Frasers Group were down 7.1% and 5.6% respectively.

Late Thursday, sports apparel maker Adidas lowered annual guidance as it struggles with ‘deteriorating traffic’ in China and high inventory levels. Adidas said it has needed to turn to ‘higher clearance activity’ to try to shift stock.

In Frankfurt, Adidas was down 10% in early afternoon trade. In the New York pre-market, peer Nike was down 1.0%.

Compounding the downside risk for clothing makers and retailers was lacklustre UK consumer confidence, with the last GfK indicator showing levels remained near historic lows. The indicator languished at minus 47 in October, but clawed back two points.

In addition, UK retail sales deteriorated at a faster pace than expected in September, according to the latest figures from ONS.

Retail sales fell 6.9% annually in September, with the decline accelerating from a 5.6% fall in August. It also was worse than FXStreet-cited market consensus, which had expected a fall of just 5%.

Asos lost 6.9%, as HSBC cut the stock to ‘reduce’. Fellow fast fashion online retailer boohoo fell 5.9%.

‘Clothing seller Asos continued its descent as investors worry about its position in a cost-of-living crisis. The feedback from its latest analyst presentation was negative, with concerns about the company going from a net cash to net debt position and a lack of confidence in its strategy to survive an economic slowdown. The shares are now down 78% year-to-date,’ said AJ Bell investment director Russ Mould.

InterContinental Hotels Group shed 4.2%.

This followed news that Chief Financial Officer & Head of Strategy Paul Edgecliffe-Johnson will leave the company in six months’ time to become CFO at sports betting firm Flutter Entertainment. Flutter added 0.6%.

IHG said in the third quarter revenue per available room, or RevPAR, rose 28% year-on-year and now exceeds its pre-pandemic level, being up 2.7% on the third quarter of 2019.

Looking ahead, IHG said demand remained ‘robust’, and it managed to open 51 hotels during the quarter, despite an industry-wide slowdown in hotel opening activity.

‘The thorn in its side is China where tough restrictions around Covid have disrupted trading once again, enough to spook investors and send the share price down,’ AJ Bell’s Mould said.

On AIM, Hummingbird resources plunged 19%.

The miner said gold production at the Yanfolila mine in Mali fell to 16,827 ounces in the third quarter from 20,013 ounces in the second quarter of 2022. The average realised gold price fell to $1,713 per ounce compared to $1,851 in the quarter immediately before.

In addition, all-in sustaining costs rose to $2,161 per ounce from $1,859 per ounce.

As a result of various issues which have hit production, Hummingbird lowered annual production guidance, and revised all-in sustaining cost guidance upwards.

In European equities on Friday, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was down 1.5%.

‘The US dollar continues extending its rally across the board, and there is nothing the other currencies can do,’ said Swissquote Bank’s Ipek Ozkardeskaya.

The euro stood at $0.9743 at midday Friday, down against $0.9822 at the close on Thursday.

Against the yen, the dollar was trading at JP¥150.98, up sharply compared to JP¥149.77 late Thursday. The continuing weakening of the yen increases the likelihood of another intervention from the Japanese government to bolster the currency.

Japan’s core consumer prices rose 3.0% in September on-year, the government said on Friday, the highest level since 2014 as the falling yen and rising energy costs hit households hard.

The data, which excludes volatile fresh food prices, brings inflation well above the Bank of Japan’s long-term 2.0% goal.

But excluding energy prices, the figure stood at only 1.8%, bolstering the central bank’s argument that current increases do not yet meet its standard for sustained price growth.

‘The Japanese inflation rate remained unchanged near 3% in September. The import prices due to the weakening yen is one of the reasons for the rising consumer prices in Japan, but the Bank of Japan is not willing to hike the interest rates just yet. Any FX intervention sill likely offer interesting dip-buying opportunities,’ Ozkardeskaya continued.

Stocks in New York were called lower, with the DJIA expected to open down 0.4%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 0.9%.

Brent oil was quoted at $92.30 a barrel at midday on Friday, down from $93.29 late Thursday. Gold was quoted at $1,624.90 an ounce Friday, down sharply against $1,641.90.

Still to come on Friday’s economic calendar is EU consumer confidence at 1500 BST.

Copyright 2022 Alliance News Limited. All Rights Reserved.

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

Issue Date: 21 Oct 2022