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(Alliance News) - Stocks in London nursed heavy falls at midday as a slowing in service sector activity offset brighter news from the UK's high streets.
A bid for Britvic provided some fizz to the trading session but failed to lift the mood, further knocked by downbeat data from Europe.
The FTSE 100 index traded 63.83 points lower, 0.8%, at 8,209.15. The FTSE 250 was down 104.78 points, 0.5%, at 20,393.94, although the AIM All-Share was up 0.40 of a point, 0.1%, at 772.78.
The Cboe UK 100 fell 0.7% to 817.26, the Cboe UK 250 declined 0.5% at 17,755.99, and the Cboe Small Companies was 0.1% lower at 16,795.21.
In European equities on Friday, the CAC 40 slipped 0.7% and the DAX 40 in Frankfurt was down 0.6%.
The downbeat mood looks set to spread to Wall Street. In New York, the Dow Jones Industrial Average and Nasdaq Composite are expected to open 0.1% lower. The S&P 500 is predicted to open down 0.2%.
The pound was quoted at USD1.2635 Friday lunchtime, down from USD1.2675 at the London equities close Thursday. The euro slipped to USD1.0678 midday London time, from USD1.0713 at the time of the European equities close Thursday. Against the yen, the dollar rose to JPY158.99 from JPY158.71.
UK economic data was mixed on Friday. Retail sales increased at a faster pace than expected last month, but business activity expanded at its slowest pace since November, data showed.
According to the Office for National Statistics, UK retail sales volumes surged 2.9% in May from April, topping the FXStreet cited consensus of a 1.5% rise. Sales had declined 1.8% in April from March. April's outcome was upwardly revised from an initially-reported 2.3% decline.
Rob Wood at Pantheon Macroeconomic said it was a strong rebound from April’s "rain-sodden disaster".
Wood highlighted the "enormous volatility" in the figures. "Retail volumes were not collapsing in April and neither are they booming now," he observed.
Nonetheless, Wood expects further increases in disposable income to feed through strongly to overall spending.
Despite the uptick in sales, retailers were generally a weak feature in London.
B&M European Value Retail fell 2.2%, Marks & Spencer slipped 1.7% and Frasers dipped 1.3%.
B&M was further knocked by a rating downgrade by Morgan Stanley to 'underweight'.
Elsewhere, figures from S&P Global showed UK private sector growth eased to its slowest pace since November this month, despite the manufacturing economy enjoying its best showing in almost two years.
The latest flash UK composite purchasing managers' index fell to 51.7 points in June, from May's final tally of 53.0 points. The market consensus was for an unchanged reading.
S&P noted the improved showing in manufacturing was offset by a slowing of service sector growth.
"Services activity grew at its softest pace for seven months, although survey evidence indicated that the slowdown was partly driven by a pause in client spending decisions during the election period," S&P said.
The manufacturing PMI expanded to a 23-month-high of 51.4 points in June's flash estimate, edging up from 51.2 in May.
The services PMI declined to a seven-month-low of 51.2 points, however, from 52.9.
In Europe, the private sector suffered a growth slowdown at the end of the second-quarter, with the manufacturing economy remaining in decline.
The latest Hamburg Commercial Bank flash purchasing managers' index fell to a three-month-low of 50.8 points in June, from May's final reading of 52.2 points. The 50.0 mark separates growth from decline.
"The eurozone's economic recovery suffered a setback at the end of the second quarter of the year, according to provisional PMI survey data. New orders decreased for the first time in four months, feeding through to softer expansions in business activity and employment. Meanwhile, business confidence dipped to the lowest since February. Rates of input cost and output price inflation eased to six- and eight-month lows respectively," survey publisher S&P Global said.
In the FTSE 100, only seven stocks were in positive territory at midday.
Of those, United Utilities rose 1.6% and Seven Trent advanced 0.9% as JPMorgan took the plunge and turned more positive on the UK water sector for the first time since it turned
cautious in 2022.
The investment bank believes share prices now reflect headwinds but don't account for more upbeat outcomes.
"We believe that the market underappreciates certain positives, especially for companies like United Utilities and Severn Trent, with a long track record of outperforming regulatory allowances, which
we expect to continue," JPMorgan stated.
JPM upgraded United Utilities to 'overweight' from 'neutral' and Severn Trent to 'neutral' from 'underweight'.
In the FTSE 250, Britvic jumped 5.8% after rejecting a 1,250 pence per share bid from Danish brewer, Carlsberg.
The proposal from Carlsberg followed an initial 1,200p per share tilt earlier in June.
Britvic, the soft drinks maker, known for its "posh tonics" unanimously rejected the plan claiming it undervalued the business.
Carlsberg said it was considering its position following the rejection and will make a further announcement.
"The proposal represents a compelling opportunity for Britvic shareholders to realise their investment in full in cash at an attractive valuation," Carlsberg added.
Looking forward, Britvic said it would continue to consider any further proposal, but that the board remained "confident" in the current and future prospects of the company.
Citi analyst Simon Hales questioned the logic behind Carlsberg's move.
"The overall strategic rationale of the transaction does not look compelling in our view," Hales said.
He suggested the bid would be dilutive to sales growth and increase debt, prompting Carlsberg to stop its share buyback.
The move for Britvic prompted gains for AG Barr, up 4.5% and Fevertree Drinks, up 3.6%.
On AIM, Ondine Biomedical leapt 12% after reporting its nasal product Steriwave is now available through the UK NHS Supply Chain.
The company said the availability makes it easier for NHS hospitals in England and Wales to purchase Steriwave.
"This marks the first time a light-activated antimicrobial has been available through the NHS Supply Chain, a national body which manages the sourcing, delivery and supply of healthcare products to the NHS and healthcare organizations in England and Wales," Ondine said.
Among London's small caps, Gulf Keystone Petroleum rose 7.6% after hailing "robust" crude sales from the Shaikan field to the Kurdistan market recently.
Sales in the year-to-date total around 38,700 barrels of oil per day. In May alone, sales averaged 48,200 bopd but have eased to 40,500 so far in June.
GKP declared a 6.832 US cents per share interim dividend, worth USD15 million in total.
GKP said it remains "committed" to returning excess cash to shareholders with an ambition to "reinstate an appropriate distributions policy to provide shareholders with greater clarity on returns."
A barrel of Brent oil fetched USD85.59 around midday Friday, down from USD85.77 late Thursday afternoon. Gold rose to USD2,363.11 an ounce, from USD2,325.80.
By Jeremy Cutler, Alliance News reporter
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