London close: Stocks carve out gains despite stronger pound, Brexit uncertainty

London shares kicked-off the new quarter on the front foot, driven by gains from the mining sector on the back of improved Chinese economic data and more positive sounds from US-China trade talks.

But a rally in the pound ahead of another round of indicative votes on alternative Brexit solutions trimmed the top off early stock market gains.

By the close, the FTSE 100 was up 0.52% to 7,317.38, while the pound was up 0.8% against the US dollar to 1.3139 and up 0.71% versus the euro to 1.1702. Meanwhile, Brent crude oil futures had risen 1.6% to $68.67 a barrel on the ICE.

With nine days until the new 12 April Brexit date, the House of Commons again wrested control of the day's proceedings to debate possible alternatives to the Theresa May's deal, with the indicative votes taking place from around 2000 BST.

These votes raise the possibility of a softer Brexit, said market analyst Josh Mahony at IG.

"The pound has been under pressure of late, with the deadlock in parliament leaving us closing in on a disorderly exit from the EU," he said. "However, today has the possibility of shifting that mindset, with Justice Secretary David Gauke hinting that Theresa May could find it difficult to go against the will of parliament. After all, a decision to defy Parliament’s wishes would also kill her own deal given the difficulty she has had in getting MPs on side.

"For sterling traders, a customs union would almost certainly provide a boost for the pound, as a softer Brexit becomes a distinct possibility."

Nonetheless, there was also the possibility, at least on paper, that the Prime Minister could opt to call a snap election.

On a related note, on Sunday, European Central Bank governing council member, Klaas Knot, told daily Handelsblatt that financial markets were not pricing-in a 'no deal' Brexit, warning that "there is a potential for significant repricing in the markets and pound sterling would come under pressure."

The toll imposed by Brexit uncertainty was apparent in a warning from Easyjet that "macroeconomic uncertainty and many unanswered questions surrounding Brexit are together driving weaker customer demand" and in reports of increased stockpiling among UK manufacturers.

IHS Markit said the current uncertainty had pushed manufacturers to try and get ahead of any unexpected disruptions, with output hitting a surprise 13-month high, pushing the survey compiler's Purchasing Managers' Index to 55.1 in March from last month’s upwardly revised reading of 52.1.

Rob Dobson, director of IHS Markit, said: “Manufacturers reported a surge of business activity in March as companies stepped up preparations for potential Brexit-related disruption. Output, employment and new orders all rose at increased rates as manufacturers and their clients raced to build safety stocks."

Overnight, Chinese factory sector activity also came out ahead of forecasts, although economists appeared somewhat unconvinced by the figures. Caixin's PMI for March printed at 50.8, versus a reading of just 49.9 for the month before and economists' forecasts for a reading of 50.0. Some market commentary was also highlighting the possibility that seasonal factors, tied to the timing of the Lunar New Year in 2019, might lie behind that strength.

Julian Evans-Pritchard at Capital Economics said: "there is now a decent chance that growth in China may bottom out slightly earlier than we had previously anticipated. That said, we still think growth could weaken again in the near-term. The recent trajectory of credit growth still points to a slowdown in the coming months."

Also earlier, ahead of Chinese vice premier Liu He's trip to Washington this week for another round of trade negotiations, Beijing said it would extend a freeze on retaliatory tariffs on US car exports and add the opioid fentanyl to a list of controlled substances.

CHINA BOOST FOR MINERS

Leading the FTSE 100 was WPP after Deutsche Bank upgraded the marketing group to 'buy' from 'hold', arguing that the 7% dividend yield offered a degree of downside protection.

A clutch of miners were not far behind, including Glencore, BHP, Rio Tinto and Antofagasta, lifted by increased optimism about China.

Going the other way, shares of utilities companies such as SSE, Severn Trent and National Grid extended their falls from last week as investors worried about the potential fall-out amid news reports from MPs mooting the possibility of a general election.

Rio Tinto was up despite revealing that iron ore shipments from Pilbara in Australia would be at the low end of guidance after a cyclone damaged a port used to transport the commodity. Shipments of iron ore from the region will be at the low end of its guidance of 338-350m tonnes.

Ferrexpo rose strongly even though it announced a further delay to its annual results to give more time for an independent review of the company’s donations to a charity called Blooming Land. The iron ore producer said it would publish its 2018 results on or before 25 April as an independent committee examines the company’s donations to Blooming Land, a Ukrainian charity set up to coordinate Ferrexpo’s corporate and social responsibility programme.

AstraZeneca edged higher after announcing more positive regulatory news. The US Food and Drug Administration has granted ‘breakthrough therapy designation’ for a potential new medicine to treat paediatric patients with neurofibromatosis, a rare genetic condition.

Travel sector shares were all in the red after easyJet's statement. The budget carrier said demand for air travel has weakened because of Brexit and wider economic uncertainty, leading to “softness” in fares per passenger per mile in the UK and Europe, easyJet said. The company said this weakness had made it more cautious about the outlook for the second half.

Tui, IAG, Thomas Cook, Wizz Air and On The Beach were all lower.

Sports Direct was slightly lower as boss Mike Ashley, rather than follow up with a firm offer for Debenhams, tried to rally further support from other shareholders to back his appointment as CEO of the troubled department store group.

In broker note action, analysts at Berenberg revised their recommendation for shares of Royal Mail from 'sell' to 'hold' and those at Morgan Stanley lowered their target on TUI from 1,250p to 1,150p, while staying at 'overweight'.

Market Movers

FTSE 100 (UKX) 7,317.38 0.52%
FTSE 250 (MCX) 19,234.84 0.61%
techMARK (TASX) 3,530.20 0.65%

FTSE 100 - Risers

Melrose Industries (MRO) 189.70p 3.58%
Standard Chartered (STAN) 611.60p 3.43%
Ashtead Group (AHT) 1,912.00p 3.21%
WPP (WPP) 836.60p 3.18%
Evraz (EVR) 640.00p 3.16%
BHP Group (BHP) 1,902.40p 2.91%
Antofagasta (ANTO) 993.80p 2.88%
Mondi (MNDI) 1,746.50p 2.86%
Hikma Pharmaceuticals (HIK) 1,839.00p 2.65%
Glencore (GLEN) 326.20p 2.59%

FTSE 100 - Fallers

easyJet (EZJ) 1,022.50p -8.50%
TUI AG Reg Shs (DI) (TUI) 713.20p -3.05%
SSE (SSE) 1,155.00p -2.70%
British American Tobacco (BATS) 3,135.00p -1.85%
International Consolidated Airlines Group SA (CDI) (IAG) 503.52p -1.66%
Severn Trent (SVT) 1,945.00p -1.57%
Fresnillo (FRES) 858.00p -1.47%
Compass Group (CPG) 1,782.50p -1.22%
National Grid (NG.) 842.80p -0.94%
GlaxoSmithKline (GSK) 1,582.00p -0.93%

FTSE 250 - Risers

Metro Bank (MTRO) 807.50p 6.53%
Ferrexpo (FXPO) 263.20p 6.30%
Weir Group (WEIR) 1,629.50p 4.59%
Renishaw (RSW) 3,858.00p 4.10%
TI Fluid Systems (TIFS) 190.00p 3.83%
Investec (INVP) 458.70p 3.71%
John Laing Group (JLG) 394.00p 3.68%
GVC Holdings (GVC) 579.00p 3.58%
Indivior (INDV) 99.48p 3.56%
Equiniti Group (EQN) 215.40p 3.56%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 2,876.00p -4.45%
Bakkavor Group (BAKK) 120.00p -3.69%
Moneysupermarket.com Group (MONY) 361.20p -2.93%
Pets at Home Group (PETS) 154.80p -2.40%
Contour Global (GLO) 169.00p -2.09%
Sabre Insurance Group (SBRE) 280.50p -1.92%
Stobart Group Ltd. (STOB) 149.40p -1.71%
Restaurant Group (RTN) 116.00p -1.69%
Pennon Group (PNN) 731.00p -1.69%
Entertainment One Limited (ETO) 439.40p -1.66%