London midday: FTSE extends losses amid AI spending fears; Rolls-Royce tanks

(Sharecast News) - London stocks had fallen further by midday on Friday amid concerns about AI spending, as investors mulled a bigger-than-expected drop in UK retail sales and a plunge in consumer confidence.

The FTSE 100 was down 0.6% at 10,664.42, while Brent crude was up 1.2% at $114.53 a barrel and West Texas Intermediate was 1.5% firmer at $100.96.

Danni Hewson, head of financial analysis at AJ Bell, said: "The FTSE 100 rapidly surrendered some modest early gains as global markets contend with concerns around surging oil prices and the sustainability of AI spending.

"Oil is at five-month highs amid speculation there may be renewed US-Israeli strikes after next month's US midterm elections.

"Escalating tensions in Ukraine and the prospect of increased energy demand as the northern hemisphere heads into the winter months are only adding to the upwards pressure on oil and gas prices.

"With the Nasdaq now 6% from its most recent all-time high it is starting to flirt with correction territory, with much now resting on next week's earnings updates from the likes of Amazon, Microsoft and Google-owner Alphabet.

"The UK market's limited exposure to tech and healthy representation for energy stocks and more traditionally defensive names means it has been spared some of the heavier losses across the US, Europe and Asia this week and that trend continued on Friday."

Investors were mulling a survey showing that business activity growth picked up in October.

The flash S&P Global composite purchasing managers' index ticked up to 53.1 from 52.0 in September, beating expectations for a reading of 51.7. This was above the 50 mark that separates contraction from expansion for the fourth month in a row and marked the highest reading since February.

Faster rates of output growth were recorded in both the manufacturing and service sectors, with the former posting its strongest upturn for just over two years.

S&P Global said greater demand meant that employment numbers returned to growth, albeit only marginally, ending a two-year period of job cuts.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "This encouraging sign of economic resilience is underscored by firms taking on additional workers for the first time since hiring was hit by the 2024 Autumn Budget.

"There are reports of paused spending due to a lack of clarity on domestic economic policy in the run up to the Budget, meaning the promising economic picture from the latest PMIs should provide an encouraging base for further robust economic growth through the winter months, barring any adverse surprises to businesses in the tax and spending review."

Earlier, figures from the Office for National Statistics showed that retail sales fell 0.4% in September following a 0.7% rise the month before, and versus expectations for a smaller decline of 0.1%.

In the three months to September, sales were up 0.7% compared with the three months to June.

ONS senior statistician Hannah Finselbach said: "Retail sales grew in the latest quarter with growth led by motor fuel which, despite recent price increases at the pump, have now returned to monthly sales levels last seen before the start of the conflict in the Middle East.

"Food and drink sales also contributed to growth in the quarter, partly helped by the warm weather and the World Cup, although they fell back slightly in September."

Also on Friday, a survey from GfK showed that consumer confidence plunged in October to the greatest extent since the onset of the Covid pandemic.

GfK's long-running consumer confidence index fell 11 points from September to -24, with all five confidence measures down. Excluding a 25-point slide at the onset of Covid, this marked the steepest fall since the Brexit vote in 2016.

In equity markets, Ithaca Energy, BP and Shell gushed higher in tandem with oil prices, while Anglo American rallied after an upgrade to 'buy' at Bank of America.

On the downside, Rolls-Royce was sharply lower after French peer Safran warned of softening growth in the wide-body jet market. The engine maker was also in focus following a report it's nearing a deal for government subsidies of up to £200m to help fund the development of a new engine for short-haul aircraft. According to the Financial Times, an announcement is possible as early as next week.

Eurowag tumbled after TA Associates sold its remaining stake in the payments processor in a placing.

Rio Tinto nudged lower after saying it will invest $1.9bn in the Kangwinan bauxite project in Queensland, Australia, adding 20m tonnes of annual production capacity as it looks to maintain its position as a leading global bauxite producer.

Lancashire Holdings was hit by a downgrade to 'underweight' at Barclays, while Trainline fell after a downgrade to 'hold' at Canaccord.

Market Movers

FTSE 100 (UKX) 10,664.42 -0.57%

FTSE 250 (MCX) 24,233.67 0.09%

techMARK (TASX) 6,204.84 -0.63%

FTSE 100 - Risers

Ithaca Energy (ITH) 297.10p 2.49%

BP (BP.) 625.70p 2.30%

Shell (SHEL) 3,963.00p 1.93%

Anglo American (AAL) 3,687.00p 1.60%

Land Securities Group (LAND) 664.00p 1.53%

Smith & Nephew (SN.) 1,147.50p 1.23%

Barratt Redrow (BTRW) 325.40p 1.18%

Weir (WEIR) 2,496.00p 1.05%

Centrica (CNA) 151.65p 1.00%

Compass Group 11 (CPG) 33.61p 0.81%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 1,168.20p -6.53%

Computacenter (CCC) 4,638.00p -3.89%

Burberry Group (BRBY) 1,052.00p -3.50%

Melrose Industries (MRO) 459.70p -3.16%

Diploma (DPLM) 7,060.00p -2.69%

IG Group Holdings (IGG) 941.00p -2.38%

Games Workshop Group (GAW) 16,360.00p -2.27%

International Consolidated Airlines Group SA (CDI) (IAG) 400.00p -2.13%

AstraZeneca (AZN) 12,734.00p -2.00%

Airtel Africa (AAF) 274.40p -1.93%

FTSE 250 - Risers

Ceres Power Holdings (CWR) 271.80p 7.00%

HGCapital Trust (HGT) 403.00p 4.69%

THG (THG) 39.68p 3.79%

Energean (ENOG) 744.50p 3.61%

Rosebank Industries NPV (ROSE) 315.00p 3.45%

Hays (HAS) 60.70p 2.97%

Volex (VLX) 542.00p 2.85%

EnQuest (ENQ) 31.70p 2.76%

Halfords Group (HFD) 262.50p 2.74%

Harbour Energy (HBR) 302.60p 2.65%

FTSE 250 - Fallers

W.A.G Payment Solutions (EWG) 103.80p -4.94%

Lancashire Holdings Limited (LRE) 664.50p -3.97%

Amaroq Ltd. Npv (DI) (AMRQ) 98.80p -3.90%

Trainline (TRN) 218.80p -2.84%

Softcat (SCT) 1,617.00p -2.71%

CMC Markets (CMCX) 703.00p -2.50%

Baltic Classifieds Group (BCG) 2.31p -2.45%

Hikma Pharmaceuticals (HIK) 1,667.00p -2.35%

Currys (CURY) 144.50p -2.30%

Watches of Switzerland Group (WOSG) 721.00p -2.09%