Interactive Investor

FTSE 100 round-up: the biggest fallers as August selling continues

August tends to be a tough month for investors, with this year shaping up to be no different. What’s behind the latest sell-off?

15th August 2023 13:42

by Graeme Evans from interactive investor

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The cheer from a profit upgrade by Marks & Spencer Group (LSE:MKS) was lost in a sea of red today as investors in sectors spanning financial, commercial property and utilities endured a torrid session.

The London market’s flight from risk left the FTSE 100 index 1.6% or 122.83 points lower by lunchtime, a level last seen a month ago and below where the top flight started the year.

Sentiment at the opening bell was already weak after the latest set of July statistics from China showed weaker-than-expected performances in industrial production and retail.

A surprise 0.15% cut in one-year medium-term lending facility failed to lift the mood as the Hang Seng index declined 1% to leave the benchmark down by 7% so far in August.

The setback for Asia markets put further selling pressure on insurer Prudential (LSE:PRU), which yesterday traded below the £10 threshold for the first time since November.

The weaker-than-expected trends in China’s economy represent the latest setback after the Pru’s repositioning towards Asia’s high growth savings and investment markets was earlier hit by Covid lockdowns and closure of the Hong Kong border.

Analysts continue to see a big upside for the shares but Barclays is now more cautious after cutting its Pru price target from 1,700p to 1,575p. Ahead of half-year results on 30 August, UBS trimmed its target by 2% to 1405p due to a reduction in new business expectations.

Pru shares fell 8.8p to 982p and were not alone in a bleak session for financial stocks, with Legal & General Group (LSE:LGEN) down 6.9p to 226.2p despite better-than-expected operating profits and Asia-facing bank HSBC Holdings (LSE:HSBA) off 15.6p at 605.9p.

Elsewhere, more selling pressure hit mining stocks as prices of copper, iron ore and other key commodities weakened on uncertainty in China’s property sector after debt-laden Country Garden Holdings Co Ltd (SEHK:2007) yesterday suspended trading in 11 onshore bonds.

Anglo American (LSE:AAL), whose 85%-owned De Beers diamonds business is increasingly focused on the growth opportunities of the China jewellery market, fell 50.5p to leave shares at their lowest level since November 2020 at around 2,029p.

Away from China, sentiment was shaken by the latest rise in the UK 10-year gilt yield after September interest rate expectations were fuelled by figures showing record wage growth. The prospect of more tightening in the Bank of England’s fight against inflation spooked markets across Europe at a time when economies are struggling to make headway.

Rate-sensitive stocks in commercial property saw more big losses as the rise in 10-year gilt yields above 4.6% further diminished the sector’s investment appeal. Land Securities (LSE:LAND) dropped 10.4p to 612.4p, wiping out tentative gains seen after last month’s drop in inflation.

It was a similar story in the regulated water sector amid rising debt costs and as higher interest rates encouraged investors to look elsewhere for returns. Severn Trent (LSE:SVT) fell 32p to 2365p and United Utilities (LSE:UU.) eased 16.6p to 937p.

One of the bright spots of the session came from the retail sector after Marks & Spencer delivered upgraded guidance for half-year profits. It has already told investors to expect a resumption of dividends when the figures are presented in November.

The signs of resilience in consumer spending helped Frasers Group (LSE:FRAS) to lift 4.5p to 809p and for shares in B&Q owner Kingfisher (LSE:KGF) shares to hold firm. B&M European Value Retail SA (LSE:BME) led the FTSE 100 risers board as investors positioned for market share gains as the discounter looks set to benefit from the administration of rival chain Wilko.

Shares rose 7.8p to 561.8p but Deutsche Bank yesterday raised its target price from 620p to 680p.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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