The FTSE 100 dropped on Tuesday as several disappointing company-specific developments culminated to offset any positivity investors may have had after hearing dovish comments by Fed Chair Powell overnight.
Utilities companies United Utilities and Severn Trent dropped on concerns around regulatory action, Rio Tinto’s recent production underwhelmed sending shares lower, and Burberry continued the sell-off amid concerns about the luxury sector.
London’s flagship index was down 0.5% at 8,140 at the time of writing.
“The FTSE 100 took a step back after the index was dragged down by Rio Tinto and Experian,” says Dan Coatsworth, investment analyst at AJ Bell.
“Rio Tinto disappointed with its latest production update, with iron ore the biggest worry area after a weak quarter for output. Experian’s update was generally fine but didn’t deliver the earnings upgrades needed to justify its premium stock rating, leaving investors a tad miffed. It also didn’t help that chief operating officer Craig Boundy handed in his notice as he’s got a new job running McAfee.”
Rio Tinto’s update weighed on the rest of the mining sector already under pressure after a string of soft China economic data releases. Rio Tinto fell 3.3% while Glencore dropped 2.2%.
United Utilities and Severn Trent
United Utilities and Severn Trent were down 2.8% and 2.7%, respectively, after Ofwat, the UK’s water regulator, announced an industry-wide investigation into sewage spills.
“Shares in United Utilities and Severn Trent have fallen as it was revealed they are facing enforcement cases brought by the regulator Ofwat. The action stems from analysis by Ofwat of their environmental performance in particular how regularly sewage is discharged via storm overflows,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown
“Ofwat is showing more teeth following the huge public outcry about the amount of pollution in the UK’s waterways. Bringing an enforcement case means that Ofwat is concerned that the companies have failed to meet their obligations. A detailed investigation will follow to determine if contraventions have occurred and what measures they may have to take to clean up their act. If there are serious breaches fines could follow.”
Although the index was firmly in the red, there were some positive stories for investors on Tuesday.
B&M gained 5% after revealing sales growth across all regions as shoppers persisted with budget options amid the cost of living crisis.
“B&M’s trading update is a bit of a mixed bag,” said Mark Crouch, analyst at investment platform eToro.
“A steady increase in revenues helped by higher volumes across its businesses indicates the discount retailer is on course to achieve cash generating growth across the full financial year. However, B&M’s UK like-for-like revenue was down 3.5%, with increasing competition throwing a spanner in the works.
“B&M, who sell a wide range of household items, managed to capitalise during the cost-of-living crisis, offering household brands at cheaper prices as more consumers turned away from big name stores in pursuit of value. However, with inflation cooling in recent months, rivals are pushing back.