Belfast Telegraph

FTSE 100 Index edges slightly lower as services sector contracts

The FTSE 100 struggled for direction on Wednesday, ending the day in the red following another set of gloomy data indicating that Britain is headed for a severe economic slump.

London's top tier finished the day 11 points down at 6634.4 after the closely-watched Markit/CIPS purchasing managers' index laid bare the continued fallout from Britain's decision to quit the European Union.

It showed the first contraction in the dominant services sector since December 2012 and the steepest rate of decline for more than seven years, while the month-on-month drop was the worst since records began in July 1996.

The dismal performance comes after surveys for the manufacturing and construction sectors also showed falling activity earlier in the week.

The figures reinforce the case for interest rates to be slashed to a new historic low on Thursday, with economists widely expecting the Bank of England's Monetary Policy Committee to deliver a cut to 0.25% from 0.5%.

Jasper Lawler, market analyst at CMC Markets, said: "The impact of Thursday's Bank of England decision on whether or not to cut interest rates will be widely felt.

"The market can't make its next directional move, particularly with regard to banking and insurance shares, until the Bank makes its decision."

The pound was also in negative territory, edging down 0.13% to 1.33 US dollars. Against the euro, sterling was up 0.24% to 1.19 euro.

In Europe, Germany's Dax and France's Cac 40 ended the day broadly flat.

The price of oil rose 1.7% to 42.50 US dollars a barrel, rising slightly following a slump on Tuesday.

Shares in Next rose 4.09% to 5,340p after the high street retailer posted better-than-expected interim figures.

Next saw a fall in full-price sales at its high street stores of 3.3% in the second quarter to the end of July, while its Next Directory arm saw sales rise 5.7%.

But the drop was not as bad as feared, while a robust end-of-season sale performance also helped limit the fall in total store sales, including markdowns, to 0.7%.

However, Next warned it may have to hike prices in the face of soaring costs after the pound plunged in value following the Brexit vote.

Shares in banking giant HSBC were up 4.47% to 504.4p after it announced a 2.5 billion US dollar (£1.9 billion) share buyback and said shareholders would receive half of the proceeds of the sale of its Brazil unit.

Profits at Britain's biggest bank slumped 29% in the first half of 2016 amid concerns over the EU referendum and the economic outlook in China.

Shares in Standard Chartered gained 4.19% to 614.30p after half-year figures showed a significant improvement on the preceding six months, with profits coming in at 994 million US dollars (£750.3 million).

Shares in Rio Tinto fell 0.76% after the Australian mining group said it would cut costs further after seeing first-half earnings nearly halve to their lowest level in 12 years.

The biggest risers on the FTSE 100 Index were Standard Chartered, Next and Associated British Foods, which was up 4.12% to 2,830p.

Among the biggest fallers were Direct Line, down 2.23%, Persimmon, down 2.73%, and Taylor Wimpey, down 1.91% to 148.7p.