Nerves were still evident in London-listed stocks on Wednesday, as an early gain for the FTSE 100 was quickly sold into by traders as macroeconomic considerations dented risk sentiment.
There’s no one factor driving markets on Wednesday, but rather a combination of the upcoming UK budget, geopolitical tensions, and steadily increasing uncertainty around the US election.
Donald Trump has gotten his nose in front of the polls, and investors are becoming increasingly concerned about what a second term for Trump may do to the global economy.
The IMF recently downgraded its global growth target for 2025, citing concerns about potential trade wars and their impact on growth. Donald Trump’s recent suggestions he’s going to try his hardest to ignite an outright trade war with China will have contributed to the downgrade.
“Caution is reigning on financial markets amid growing expectations that borrowing costs might come down slower in the US, the world’s largest economy, while political uncertainty and the threat of conflict spreading in the Middle East is also keeping investors a little more wary,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
After starting the session positively on Wednesday amid upbeat reports from Lloyds and Barratt Redrow, London’s leading index slipped back to trade down 0.2% at the time of writing.
Although the FTSE 100 was down as an index, there were some positive updates on the corporate front.
WPP shares rose 4% as revenue increased 1.4% in the third quarter, driven by robust demand in North America and Europe. The marketing giant also noted strength in its top ten clients, from which it earns a large proportion of its revenue.
Lloyds also had a positive session after reporting better-than-expected underlying profits, although provisions for bad debt were less than expected.
“There has been concern about the impact on consumer confidence from speculation ahead of the Budget but Lloyds paints a picture of improvement as its third quarter pre-tax profit beat expectations,” said Russ Mould, investment director at AJ Bell.
“The beat was driven by lower-than-expected impairments. The amount of bad debt being chalked up is still low and the bank and its customers will hope we’re now through the worst of the cost-of-living crisis.
“The other big positive surprise for investors was the quarter-on-quarter increase in the net interest margin – measuring the difference between what the bank pays out to depositors and charges those to whom it is lending money.”
Newly-merged Barratt Redrow shares ticked higher after giving investors reason to be hopeful with a decent forecast of completions for the year ahead.