US stocks sour and FTSE closes down as UK manufacturing slips into red

Markets were wavered on the first trading day of the year, as the FTSE reversed early gains. (Sam Mellish via Getty Images)

London and US markets were in the red on Tuesday, reversing a positive start as a key measure of UK manufacturing output slipped into the red.

The FTSE 100 (^FTSE) was down 0.2% as the day rounded out, after the S&P Global monthly PMI showed manufacturing in the UK in contraction in December. The reading for last month was 46.2 — any number above 50 indicates growth.

The further slide in output volumes reflected overstocking at clients and tighter inventory policies at manufacturers, S&P said. The support provided by efforts to clear backlogs of work was also less effective than in recent months, it added.

All five of the PMI sub-indices — new orders, output, employment, stocks of purchases and suppliers' delivery times — remained at levels signalling a deterioration in operating conditions.

Elsewhere, European stocks were mixed. Germany's DAX (^GDAXI) was up 0.1% and the CAC (^FCHI) lost 0.2% after Eurozone PMIs also signalled a contraction in manufacturing output.

US stocks continued the downbeat mood by the close in the UK, with the S&P 500 (^GSPC) down 0.6%, the Dow (^DJI) was almost flat and the Nasdaq (^IXIC) trailing 1.5%.

Read more: 12 charts that show the cost of living increases in 2023

Data released on Tuesday also showed that food price inflation in the UK cooled to its lowest level since June 2022, with overall shop price inflation remaining unchanged at 4.3% in December. This was below the three-month average rate of 4.6%.

Meanwhile, the pound was down sharply, 0.8% against the dollar (GBPUSD=X) to trade at around the $1.26 mark.

Trouble in the Red Sea

Oil prices headed higher on Tuesday, as tension across the Red Sea continues.

Brent crude (BZ=F) was up as much as 2.1%, to trade at $78.66 a barrel as markets opened. By the afternoon in London brent was only up 0.1% at $77.15 a barrel. Crude (CL=F) also rose 2.1% to trade at $73.14 before falling 0.1%.

Israel said on Monday that it expects the conflict to continue throughout 2024.

Overnight in Asia

Stocks in China fell overnight after mixed data was released on its manufacturing sector. The country's official PMI showed that manufacturing output slipped further into the red in December, signalling a potential need for more economic firepower from the government.

Data from Caixin, another monitor, however, has shown growth in manufacturing, coming in at 50.8 in December, up from 50.7 in November.

There had been concerns throughout 2023 that growth in one of the world's largest economies is stalling, with the government offering various packages to try to help it rev up again.

Read more: UK food inflation slows in December but risk of price increases looms

The Hang Seng (^HSI) was down 1.5% at the close on Tuesday while the SSE Composite (000001.SS) slipped 0.4%.

Markets in Japan, which will likely have a reaction to a deadly earthquake in Ishikawa, are closed until 4 January.

Read more: SG's Yao: China Housing Demand In Contraction

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