The UK’s blue-chip index closed lower on Tuesday, weighed down by losses in mining and retail sectors, while mid-cap stocks also declined following disappointing earnings and outlooks.
Mining Shares Drop on Copper Prices
The FTSE 100 index, which tracks the performance of the 100 largest companies listed on the London Stock Exchange, fell 0.2% to end the day at 7,456.18 points. The index had risen as much as 0.4% in early trading but reversed gains as copper prices slid ahead of key economic data from China and the US later this week.
Copper, a key industrial metal, is sensitive to changes in demand and supply conditions in the world’s two largest economies. China is the top consumer of copper, while the US is the second-largest. Both countries are expected to release figures on inflation, money supply, and industrial production in the coming days, which could signal the direction of their monetary policies and growth prospects.
Mining shares, which account for about 10% of the FTSE 100’s weighting, were among the biggest losers on Tuesday. The FTSE 350 Mining index, which includes both blue-chip and mid-cap miners, dropped 0.9%. Precious metal miners also fell 0.8%, as gold and silver prices retreated from recent highs.
Among the individual mining stocks, Anglo American (AAL.L) fell 2.4%, Glencore (GLEN.L) lost 1.9%, and BHP Group (BHPB.L) declined 1.6%. Rio Tinto (RIO.L), the world’s largest iron ore producer, shed 1.3%, despite announcing a record annual shipment of the steelmaking ingredient from its Australian operations.
Retailers Struggle with Sluggish Sales
Another sector that dragged the FTSE 100 lower was retail, which fell 0.8% as a group. Several UK retailers reported subdued sales during the crucial Christmas period, which may add to concerns that the UK economy has slipped into a mild recession.
According to the British Retail Consortium, UK retail sales rose by only 0.4% year-on-year in December, the lowest growth rate since 2015. The trade body blamed Brexit uncertainty, political instability, and weak consumer confidence for the lackluster performance.
Some of the worst-hit retailers on Tuesday were JD Sports (JD.L), the UK’s largest sportswear retailer, which fell 2.1%, and AO World (AO.L), an online seller of appliances and electronics, which dropped 2.3%. Both companies warned of challenging market conditions and margin pressures in their trading updates.
Other retailers that reported disappointing sales included Marks & Spencer (MKS.L), which slid 1.4%, and Tesco (TSCO.L), which edged 0.3% lower. Both companies said their food sales were flat or slightly down in the 13 weeks to Dec. 28, while their clothing and general merchandise sales fell sharply.
Mid-Cap Stocks Hit by Earnings Woes
The FTSE 250 index, which tracks the performance of the 250 next-largest companies listed on the London Stock Exchange, also closed in the red on Tuesday, falling 0.4% to 21,626.64 points.Â
One of the biggest losers on the mid-cap index was Hays (HAYS.L), a recruitment firm that operates in 33 countries. The company’s shares plunged 11.7% after it forecast lower-than-expected first-half profit and said the short-term outlook will remain challenging amid a hiring slowdown.
Another mid-cap stock that tumbled was Jupiter Fund Management (JUP.L), a UK-based asset manager. The company’s shares slumped 13.1% to the bottom of the FTSE 250 after it flagged higher-than-expected net outflows in 2023 and announced the departure of veteran portfolio manager Ben Whitmore this summer.
A third mid-cap stock that suffered was MJ Gleeson (GLEG.L), a UK housebuilder that focuses on low-cost homes. The company’s shares sank 10% after it reported lower home sales in the half-year to Dec. 31, citing delays in planning approvals and land acquisitions.
Despite the gloomy mood on Tuesday, some analysts and investors remained optimistic about the prospects for UK equities in 2024, citing the potential for a recovery in economic growth, corporate earnings, and consumer spending.
The UK economy is expected to rebound from its sluggish performance in 2023, thanks to the resolution of the Brexit deadlock, the easing of trade tensions, and the stimulus measures announced by the new Conservative government.
The FTSE 100 index is also expected to benefit from the weakness of the British pound, which boosts the earnings of the many multinational companies that derive most of their revenues from overseas markets.
Source: Reuters
