The FTSE 100 was marginally lower on Wednesday, reflecting minor disappointment with soft UK GDP figures that hit some of London’s more UK-centric large caps.
After flatlining in June, UK GDP growth again produced zero growth in July, raising concerns about the health of the UK economy in a period that should have seen some uplift from various sporting events.
Some may blame the weather, but two consecutive months of zero growth are concerning, and investors sold off UK-focused sectors such as housebuilders and retailers on Wednesday.
Persimmon and Berkeley Group Holdings were down more than 1% as the market digested the construction component of GDP and a slowdown in July.
“A rise in output from the large services sector was offset by a fall in production and construction during the month. This picture of stagnation is another piece in the jigsaw for Bank of England policymakers to consider when they meet next week,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“There may be slightly heightened concerns around the table that the economy is on the cusp of a downturn. This will reinforce expectations for two rate cuts in the months to come, but the jury is still very much out when it comes to next week’s decision. Financial markets have been assessing the chance that rates will be kept on hold as above 75%, so this data point alone is unlikely to move the dial significantly.”
Rentokil Initial
Rentokil Initial shares plunged on Wednesday after the pest control group made worrying sounds about its North American business. The company said branch integration and softer sales is likely to lead to a £20m drop in operating profit. The news wasn’t taken well by investors and shares were down 17% at the time of writing.
“You would think pest control is a stable business with consistent demand but that consistency hasn’t been reflected in the performance of Rentokil of late,” said Russ Mould, investment director at AJ Bell.
“Its latest warning is a bit of mess. While its business in the rest of the world is getting on OK, the company is struggling in North America.
“Weaker than expected revenue has been compounded by problems of the company’s own making such as insufficient control of costs hitting profitability.”
Entain was the top gainer on Wednesday as the gambling company continued its rally after recent upbeat news from US operations. Entain was 2% higher shortly before lunch.