FTSE 100 hits 2 month low as Chinese data and US debt ceiling woes bite

FTSE 100 sinks to 2-month low

The FTSE 100 is down 0.8% this morning, with the blue-chip index at its lowest level in two months. That reflects growing fears about the recovery of the Chinese economy after manufacturing activity contracted more than anticipated and services growth slowed in May, while nerves about the US debt ceiling linger as Congress prepares to start voting on proposals to avoid a disaster today.

FTSE 100 analysis: Where next for the index?

The UK 100, which tracks the FTSE 100, is on course to lose ground for a third consecutive session today. We can see the index slipped below the supportive trendline that could be traced back to last October yesterday, presenting a new bearish signal. We could see the index slip toward 7,450 if it remains under pressure. A break below here would bring the closing-low of 2023 back into play at 7,314.

On the upside, we can see that the RSI is on the verge of entering oversold territory to suggest it could find some support. The index needs to recover back above the supportive trendline before it can try to recapture the floor that held throughout the first three weeks of May at 7,710.

Top UK stock news

London’s mining giants including Anglo American (-0.6%), Rio Tinto (-2.1%) and Antofagasta (-1%) are dragging down the index today as copper and iron ore prices remain under pressure. Copper prices have been declining recently and remain near six-month lows while iron ore is on the verge of slipping below $100 per tonne. That reflects woes about slowing manufacturing activity in China.

Energy stocks are also dragging indices lower today as oil prices sink, with Brent trading at its lowest level in almost four weeks as concerns over demand rise amid the weak data out of China. BP is down 0.6% while Shell is trading 1.5% lower.

Entain is down 2.7% after warning it is likely to face a ‘substantial financial penalty’ as part of an investigation being conducted by the HMRC over its former Turkish online gaming and betting business. Entain ran the business from 2011 until it sold the unit in 2017. The investigation includes but is not limited to accusations of bribery. Entain acknowledged that ‘historical misconduct involving former third party suppliers and former employees of the group may have occurred’.

B&M European Retail Value is up 2.9% after it said revenue rose 6.6% in the year to the end of the March to £4.98 billion, coming in just ahead of the £4.96 billion forecast, and that pretax profit fell 17% to £436 million, which it said reflected the ‘normalisation of trading to a post-pandemic period’. Sales were over 30% ahead of 2019 levels. B&M said UK like-for-like sales had continued to grow every month since June, demonstrating its widening appeal, and promised there is more profitable growth to come. It plans to open 30 new UK stores, 10 in France and 20 Heron Foods outlets in the new financial year. The total dividend for the year was cut to 14.6p from 16.5p while special payouts dropped to 20.0p from 25.0p the year before.

Prudential is down 2.5% after appointing Ben Bulmer as its new chief financial officer. He is succeeding James Turner, who has resigned ‘in light of an  investigation into a Code of Conduct issue relating to a recent recruitment situation.’ Bulmer is being promoted from his role as CFO of insurance and asset management.   

Bodycote is down 0.2% after it announced chief executive Stephen Harris plans to retire next year, kicking off a search for his successor. The company plans to consider both internal and external candidates to replace Harris, who has been with Bodycote since 2008 and CEO since 2009. That came as Bodycote said trading was ‘modestly ahead of expectations’ in the first four months of 2023, with revenue rising 22.2% to £281 million. It left its full year outlook unchanged.

WH Smith is up 1.2% after it said its outlook for the current financial year has ‘modestly improved’ as it continues to benefit from the recovery in demand for travel, which it is capitalizing on by opening new stores. The firm said sales at its Travel outlets grew 31% from the year before in the 13 weeks to May 27, complimented by a much milder 2% increase from its high street stores. Overall, that meant sales were up 23% in the period, or 14% on a like-for-like basis.

Bakkavor Group is up 3.7% after it said it now expects to deliver adjusted operating profit at the upper end of expectations this year following a strong start. Markets currently anticipate it can deliver profit of £80 million to £85 million over the full year. That would still be down from the £89.4 million delivered in 2022. Bakkavor said revenue rose 9% in the 13 weeks to April 1 to £529.3 million, with like-for-like growth of 7.6%. Growth was strongest in China, followed by the US and then the UK. It said it will deliver savings faster than previously expected.

JD Wetherspoon has been upgraded to Buy from Hold by HSBC, which has a target price of 940p on the pub chain. The stock is up 4.6% at 743.50p this morning. The broker also raised its rating on fellow pub chain Mitchells & Butlers to Buy from Hold, with a price target of 300p, with the company up 1.7% today at 205.20p.

BNP Paribas Exane has initiated coverage on engineer Dowlais Group with an Underperform rating and a price target of 120p. The stock is down 3% today at 130.80p

DWF Group has been downgraded to Sell from Hold by Liberum, which has a price target on the legal services stock of 50p. The stock is down 0.7% at 63.38p this morning.

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