London midday: FTSE turns lower as investors mull UK PMI; Burberry bucks trend

(Sharecast News) - London stocks had fallen into the red by midday on Friday as investors mulled a slide in consumer confidence and another fall in private sector employment. The FTSE 100 was down 0.4% at 8,535.59, having opened higher as investors welcomed the latest comments from US President Donald Trump, who said in a virtual appearance at Davos that he would "rather not" impose tariffs on China.

Gains were short-lived, however, as a survey showed that business activity continued to grow in January, but employment in the private sector fell for the fourth month in a row.

The S&P Global flash UK PMI composite output index rose to 50.9 from 50.4 in December. A reading above 50.0 indicates expansion, while a reading below signals contraction.

The flash services PMI business activity index nudged up to 51.2 in January from 51.1 a month earlier, while the manufacturing output index remained in contraction territory at 49.3, up from 45.9 in December.

The survey showed that employment levels fell for the fourth consecutive month due to rising cost pressures, with input price inflation rising to its highest level since May 2023.

Respondents pointed to hiring freezes and the non-replacement of voluntary leavers amid rising payroll costs.

Many firms suggested the upcoming hike in employers' national insurance contributions had led to cutbacks to recruitments plans. The impact of the post-Budget slump in business confidence was also mentioned.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The loss of confidence, combined with widespread concerns over higher staff costs associated with the Budget, pushed employment sharply lower again.

"Barring the job cutting seen during the pandemic, the rate of job losses signalled by the PMI over the past two months has been the highest since the global financial crisis in 2009."

Elias Hilmer, assistant economist at Capital Economics, said: "Overall, today's data release won't alleviate the Bank of England's concerns about the weakness of activity.

"As a result, we still think the Bank will cut interest rates from 4.75% now to 4.50% in February, but the further strengthening in price pressures suggest it will cut rates only gradually thereafter."

Earlier, the latest survey from GfK showed that consumer confidence fell as the new year got under way.

The GfK consumer confidence index for January came in at -22, a five-point drop on December and three points lower than January 2023.

Within that, expectations for personal finances in the coming year dropped back into negative territory, losing three points to -2.

Respondents were similarly gloomy about prospects for the wider economy, with the sub-index sliding eight points to -34.

Spending was also shelved in favour of saving. The major purchase index lost four points to -20 while the savings index jumped nine to 30.

Neil Bellamy, consumer insights director at NIQ GfK, said: "New Year is traditionally a time for change, but looking at these figures, consumers don't think things are changing for the better.

"These figures underline that consumers are losing confidence in the UK's economic prospects."

He added that the sharp increase in saving intentions was "unwelcome, because it's another sign that people see dark days ahead and are therefore thinking of putting money aside for safety".

In equity markets, miners were the top performers on the FTSE 100 as base metals prices rose, with Antofagasta, Glencore and Rio Tinto all up.

Russ Mould, investment director at AJ Bell, said: "Copper, aluminium, lead, zinc and tin all saw higher prices amid a weaker dollar. Metals are typically priced in dollars and a decline in the US currency makes the commodities cheaper for buyers holding other currencies.

"Also putting a shine on metals prices was speculation that Donald Trump might not take the nuclear option regarding tariffs on China, potentially imposing a lower rate than has previously been suggested."

Burberry surged as it said the rate of sales decline eased significantly in the luxury fashion brand's third quarter as recent actions to turn the business around started to bear fruit.

Retail revenues were down just 7% year-on-year in the three months to 28 December at £659m, following a 22% sales slump in the first half.

Burberry said it was "encouraged by the response from customers and partners over the festive period", which the company attributed to the 'Burberry Forward' brand reset initiated in November.

"In light of our Q3 performance, it is now more likely our second-half results will broadly offset the first-half adjusted operating loss, notwithstanding the uncertain macroeconomic environment," it said.

Elsewhere, Rolls-Royce was in focus after it was awarded a £9bn nuclear submarine contract by the UK Ministry of Defence (MoD).

Market Movers

FTSE 100 (UKX) 8,535.59 -0.35% FTSE 250 (MCX) 20,576.99 0.28% techMARK (TASX) 4,719.37 -0.16%

FTSE 100 - Risers

Antofagasta (ANTO) 1,788.00p 3.35% JD Sports Fashion (JD.) 84.08p 2.91% WPP (WPP) 746.20p 2.67% Glencore (GLEN) 382.35p 2.37% Entain (ENT) 690.00p 1.98% Diageo (DGE) 2,448.50p 1.96% Prudential (PRU) 664.20p 1.87% Mondi (MNDI) 1,227.00p 1.87% Rio Tinto (RIO) 5,036.00p 1.79% Spirax Group (SPX) 7,720.00p 1.31%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 325.60p -2.16% Taylor Wimpey (TW.) 116.40p -1.85% Pearson (PSON) 1,267.50p -1.78% Convatec Group (CTEC) 237.40p -1.74% Compass Group (CPG) 2,695.00p -1.64% Barclays (BARC) 294.20p -1.49% NATWEST GROUP (NWG) 423.20p -1.49% Centrica (CNA) 135.60p -1.45% Tesco (TSCO) 361.70p -1.34% United Utilities Group (UU.) 969.80p -1.30%

FTSE 250 - Risers

Burberry Group (BRBY) 1,211.50p 13.17% Kainos Group (KNOS) 801.00p 4.57% Babcock International Group (BAB) 523.50p 4.49% Bloomsbury Publishing (BMY) 678.00p 3.67% CMC Markets (CMCX) 227.50p 3.17% W.A.G Payment Solutions (WPS) 73.20p 2.81% Trainline (TRN) 371.20p 2.77% Pagegroup (PAGE) 320.40p 2.76% Dr. Martens (DOCS) 72.80p 2.68% Pets at Home Group (PETS) 209.60p 2.64%

FTSE 250 - Fallers

Harbour Energy (HBR) 255.10p -7.37% Diversified Energy Company (DEC) 1,272.00p -3.49% Oxford Nanopore Technologies (ONT) 138.00p -2.95% Ithaca Energy (ITH) 124.10p -2.44% Morgan Sindall Group (MGNS) 3,655.00p -2.01% Foresight Environmental Infrastructure Limited (FGEN) 64.80p -1.97% Energean (ENOG) 995.50p -1.92% Investec (INVP) 531.00p -1.76% Pennon Group (PNN) 507.50p -1.74% AJ Bell (AJB) 465.50p -1.69%