Best and worst UK shares in Q3 2024

Cheaper heavyweight stocks BP (LSE:BP.), Shell (LSE:SHEL) and AstraZeneca (LSE:AZN) offset a retail bounce led by Marks & Spencer Group (LSE:MKS) as the FTSE 100 index lagged its global peers during the third quarter.

London’s top flight put on just under 1%, well behind the 8% of the record-setting Dow Jones Industrial Average and the 3.8% advance for the UK-focused FTSE 250 index.

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Hong Kong’s Hang Seng index was the best of the global benchmarks, up 19% in its best quarterly performance since 2009 thanks to a re-rating inspired by China stimulus.

The CSI 300, which features Shanghai and Shenzhen-listed stocks, rose 16% after adding 8.5% on the final day of the quarter in its strongest daily performance since September 2008.

The turnaround included an advance of 27% from 13 September, taking the benchmark from a five-year low to a one-year high.

The Nikkei 225 was the only one of the major indices to finish lower, its second consecutive decline due to the appreciation of the yen.

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Most global markets finished the quarter higher, despite a period of upheaval that saw the VIX index of volatility hit its highest intraday level since March 2020.

Fears of a US recession and doubts over the valuation of high-growth stocks including NVIDIA Corp (NASDAQ:NVDA) were accompanied by the unwinding of the yen carry trade. This involves borrowing in the yen as a low-yielding currency in order to invest in higher-yielding currencies.

Deutsche Bank said this morning the turmoil had been “remarkably brief” as a dovish pivot from central banks including the Federal Reserve along with stronger US data and fresh China stimulus led to a significant recovery.

By the end of the third quarter, Wall Street’s S&P 500 index had posted its strongest year-to-date performance of the 21st century.

The outlook for faster interest rate cuts in the United States had a bearing on the London market as a stronger pound impacts the FTSE 100’s large proportion of overseas-earning stocks.

In contrast, UK-focused companies from the retail, housebuilding and utility sectors dominated the list of top-performing stocks in the third quarter.

The consumer spending impact of the UK’s growth in real wages meant Marks & Spencer, Kingfisher (LSE:KGF) and JD Sports Fashion (LSE:JD.) rose by as much as 30% in the quarter.

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The return of more rational market conditions also helped Tesco (LSE:TSCO) and Sainsbury (J) (LSE:SBRY)’s, particularly with private equity-owned Morrisons and Asda constrained by their focus on cash flows.

The supermarkets rose more than 15%, leaving them between Persimmon (LSE:PSN) and Taylor Wimpey (LSE:TW.) after the Bank of England’s first cut in the interest rate cycle boosted confidence.

British Airways owner International Consolidated Airlines Group SA (LSE:IAG) and easyJet (LSE:EZJ) outperformed their European rivals as their shares lifted 27% and 14% respectively, aided by August fare trends and the decline in jet fuel prices.

Rolls-Royce Holdings (LSE:RR.) and Unilever (LSE:ULVR) traded in record territory during the period, registering rises of 11% and 15% respectively. Workplace supplier Bunzl (LSE:BNZL) also traded at an all-time high as part of a 17% advance in the quarter, while gaming stock Entain (LSE:ENT) rallied 21%.

Miners failed to appear in the top 25 of the FTSE 100 index, despite a strong finish to the three-month period. Deutsche Bank noted that gold prices rose for a fourth consecutive quarter, with its strongest showing since 2016 taking the non-yielding asset above $2,600 an ounce.

In contrast, Brent crude oil prices fell by 17% in the quarter to $71.77 a barrel for their lowest monthly closing level since the opening three months of 2021.

The potential impact on cash flows and the outlook for dividends and buybacks meant BP retreated 17.6% to a two-year low and Shell fell 14%.

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Another warning on US trading ensured that pest control firm Rentokil Initial (LSE:RTO) fared the worst in the FTSE 100 as shares fell 21%.

AstraZeneca touched a record high in September, only for a disappointing lung cancer drug trial update to trigger a sell-off that left it 6% lower in the quarter. There was a similar experience for BAE Systems (LSE:BA.) investors as the defence firm fell 6%.

The quarter’s top performing stocks in the FTSE 250 included Ocado Group (LSE:OCDO) and WH Smith (LSE:SMWH), with Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML) among the worst after its profit warning in the final session of September.

Meanwhile, fears of tax changes in the Autumn Budget negatively impacted AIM-listed shares as the index covering the junior market’s top 100 stocks fell 2%.