London close: Stocks buoyed by positive data at home and abroad

London stocks finished slightly higher on Friday as investors cheered better-than-expected Chinese manufacturing figures, reports that a US-China trade deal might soon be clinched, with WPP leading the charge on well-received results.

The FTSE 100 was up 0.45% to 7,106.73, helped along by a weaker pound as well, which fell 0.3% against the US dollar to 1.32190 and 0.34% versus the euro to 1.1623.

In parallel, the second-tier index had run-up 1.14% to end the week at 19,399.65.

China's Caixin manufacturing gauge rose to a three-month high of 49.9 in February from 48.3 in January, coming in above expectations for a reading of 48.5, although still in contraction territory.

"The update wasn’t amazing, but it was a step in the right direction," said CMC Markets UK's analyst David Madden.

Adding to the risk-on mood at the start of the month, citing people familiar with the matter, overnight Bloomberg reported that officials in Washington were preparing a final trade deal that the US and Chinese leaders could sign in weeks, although there was apparently an ongoing debate on Capitol Hill as to whether the Trump administration should push for more.

On the UK macro front, figures showed that manufacturers benefited from further stockpiling last month, as companies looked to prepare for potential Brexit-related disruptions, though new orders were almost totally stagnant.

The UK purchasing managers' index from IHS Markit fell to 52.0 for February from the previous month's figure that was revised down to 52.6 from 52.8. February's reading was in line with forecasts but the second-slowest rate in over two years.

Economist Thomas Pugh at Capital Economics said a stagnant manufacturing sector would still be an improvement on the 0.7% month-on-month contraction recorded in December, the latest hard data.

"Overall, it is clear that the manufacturing sector is being hit hard by the combination of Brexit and the global slowdown. As such, the survey suggests that the manufacturing sector will provide little support to the economy in Q1, even though there are some signs of activity being bolstered by Brexit preparations."

Elsewhere, figures from the Bank of England revealed that consumer and business lending jumped in January.

House purchase mortgage approvals jumped to 66,800 in January from 64,500 in December, while economists had expected a drop to 63,400. Net consumer credit increased £1.1bn, above the six month average of £0.9bn and the £0.8bn consensus estimate.

Business borrowing from banks and financial markets leapt to £9.2bn compared to the month before compared to the £2.4bn average seen in 2018. Bank lending to large businesses now is growing at a 6% year-over-year rate, which the BoE said largely reflected a rise in M&A activity from large companies.

"We suspect that the wider pick-up in borrowing also reflects firms locking-in finance ahead of Brexit, in case financial market gum up in a no-deal scenario," said economist Samuel Tombs at Pantheon Macroeconomics.

Andrew Wishart at Capital Economics was arguably somewhat more upbeat, saying: "The solid increase in unsecured household borrowing in January suggests that the UK’s scheduled departure from the EU and concerns of a disorderly exit were not causing consumers or lenders to become more cautious.

"[...] None of this means that consumers aren’t vulnerable. The growth of funds households have available to spend has eased. However, reflecting increases in real pay and high and rising employment, this is now bottoming out."

In corporate news, recovering media giant WPP was the top gainer as its revenue slipped less than feared last year but the company said 2019 will be challenging after a spate of client losses. Revenue of £15.6bn for 2018 was down 2.6% year-on-year or 0.4% lower on a like-for-like basis, with a 0.1% decline in the fourth quarter. Analysts had on average expected a decline of 0.6% for the year and 1.5% for the fourth quarter.

George Salmon, equity analyst at Hargreaves Lansdown, said: "Stronger momentum in Europe and emerging markets provides some welcome relief after a torrid 2018.

"WPP is undergoing a transformation that’ll hopefully see it shed significant levels of debt, and dispose of several non-core divisions, meaning it emerges as a simpler business with a stronger balance sheet. Holding the dividend at 60p during the next few years would mean investors get a handsome yield while they wait, but markets are tough at the moment and turning around a supertanker like WPP takes time.

"The light at the end of the tunnel is getting nearer, but with 2019 set to be impacted by continued weakness in the key US market, revenue and margin trends could well get worse before they get better."

London Stock Exchange rose as it reported a jump in profit and revenue for the full year thanks to "strong" growth across its core business divisions, while Jupiter Fund Management surged as its final results came in a touch below consensus but the dividend was better than expected

Engineering group IMI advanced as it said adjusted pre-tax profit increased 12% in 2018, while miners Rio Tinto and Antofagasta racked up healthy gains on the back of the China data.

On the downside, Rightmove slumped even as it posted an in-line set of results, while William Hill was in the red after saying it swung to a full-year pre-tax loss of £721.9m from a profit of £146.5m in 2017.

Coats Group was under the cosh as it suffered a drop in 2018 profit, while hedge fund Man Group declined as its full-year funds under management fell.

In broker note action, B&M European Value Retail was boosted by an upgrade to ‘top pick’ at RBC Capital Markets.

Fresnillo was cut to ‘underperform’ at Macquarie, but Rathbone Brothers was raised to ‘outperform’.

Market Movers

FTSE 100 7,106.73 +0.45%

FTSE 250 19,399.65 +1.14%

FTSE 100 - Risers

WPP (WPP) 866.20p +4.89%

London Stock Exchange Group (LSE) 4,695.00p +4.17%

ITV (ITV) 136.15p +3.85%

British American Tobacco (BATS) 2,863.00p +3.79%

Burberry Group (BRBY) 1,947.50p +3.07%

Wood Group (John) (WG.) 535.00p +2.81%

Mondi (MNDI) 1,777.00p +2.81%

Hargreaves Lansdown (HL.) 1,790.50p +2.78%

St James's Place (STJ) 996.00p +2.43%

Melrose Industries (MRO) 178.05p +2.39%

FTSE 100 - Fallers

Relx plc (REL) 1,610.50p -6.85%

Rolls-Royce Holdings (RR.) 905.00p -5.24%

Fresnillo (FRES) 824.00p -4.19%

Rightmove (RMV) 471.90p -2.12%

Lloyds Banking Group (LLOY) 62.85p -1.09%

Barclays (BARC) 162.50p -1.01%

Rentokil Initial (RTO) 347.60p -0.97%

SEGRO (SGRO) 655.00p -0.91%

Royal Bank of Scotland Group (RBS) 263.30p -0.90%

Taylor Wimpey (TW.) 179.80p -0.88%

FTSE 250 - Risers

Spirent Communications (SPT) 161.20p +7.61%

Jupiter Fund Management (JUP) 362.70p +7.09%

Vivo Energy (VVO) 135.38p +6.35%

Just Group (JUST) 108.90p +5.63%

Morgan Advanced Materials (MGAM) 271.20p +5.12%

Galliford Try (GFRD) 775.00p +4.80%

Sophos Group (SOPH) 342.80p +4.58%

Synthomer (SYNT) 397.20p +4.42%

Halfords Group (HFD) 247.00p +4.40%

Mediclinic International (MDC) 331.80p +4.37%

FTSE 250 - Fallers

Coats Group (COA) 81.50p -8.01%

Indivior (INDV) 103.05p -4.05%

Hochschild Mining (HOC) 191.85p -3.30%

Man Group (EMG) 134.55p -2.61%

William Hill (WMH) 183.45p -2.19%

Ascential (ASCL) 362.00p -1.58%

Acacia Mining (ACA) 212.90p -1.53%

Amigo Holdings (AMGO) 230.00p -1.52%

TI Fluid Systems (TIFS) 187.60p -1.00%

Howden Joinery Group (HWDN) 488.10p -0.93%