London close: FTSE closes lower as pound surges

London stocks closed in the red on Thursday as an upbeat report on UK manufacturing sent the pound higher, amid weak data out from the US and China.

The FTSE 100 ended down 0.52% to 6,745.97 points.

The pound jumped 1.18% against the dollar to $1.3293 and increased 0.87% versus the euro to $1.1877 in afternoon trade after data showed UK manufacturing activity improved more than expected in August.

The Markit/CIPS UK manufacturing purchasing managers’ index climbed to a 10-month high of 53.3, recovering from the 41-month low of 48.3 hit in July following the EU referendum. Economists had been expecting a reading of 49.0. A level above 50.0 signals an expansion in sector activity while a reading below that indicates a contraction.

“Perhaps the big news of the day was the UK’s manufacturing PMI, which soared in August and saw traders rush to buy the pound,” said IG’s chief market analyst Chris Beauchamp.

“Mark Carney might be feeling a little bit nervous about his decision to go for QE so soon after Brexit, but for the mid-cap index the reading was a cause for rejoicing and a reason to buy up anything and everything connected with the UK economy.”

Meanwhile, the International Monetary Fund warned in a report that it will likely downgrade its 2016 global growth forecasts again in early October due to the knock-on effects of Brexit and a slower-than-expected rate of expansion in the US. However, the Fund said financial markets had stabilised after the turmoil seen in the days after the UK’s EU referendum on 23 June.

Elsewhere, China’s official manufacturing PMI rose to 50.4 in August from 49.9 a month earlier. Analysts had expected no change to the reading.

The Caixin China manufacturing PMI, a separate private gauge of activity in the sector, dropped to 50.0 in August from 50.6 in July.

The official PMI for non-manufacturing was also released, showing a drop to 53.5 in August from 53.9 in July.

In the Eurozone, Markit’s final eurozone manufacturing PMI came in at 51.7 in August, marking a three-month low. This was down from the flash estimate of 51.8 and July’s reading of 52.0.

Stateside, Markit’s final manufacturing PMI fell to 52.0 in August from 52.9 the month before and the flash estimate of 52.1.

Separate figures from the Institute for Supply Management showed growth in the US economy’s manufacturing sector slipped a lot more than expected in August, moving into contraction territory. The ISM index of national factory activity fell to 49.4 from 52.6 in July, missing expectations for a reading of 52.0.

More positively, the US weekly jobless claims rose less than expected. The Labor Department said initial jobless claims increased 2,000 to a seasonally adjusted 263,000 in the week ended 27 August, compared to analysts’ forecasts of 265,000. The previous week’s reading was unrevised.

On the corporate front, housebuilders rallied with Berkeley, Taylor Wimpey, Persimmon and British Land all sharply higher, a day after Nationwide revealed that UK house prices rose more than expected in August despite Brexit uncertainty. Traders also attributed the sector’s strength to the strong UK manufacturing figures out earlier in the session.

Berkeley Group rose as investors shrugged off the news it was likely to drop out of the FTSE 100.

Dixons Carphone was boosted as Deutsche Bank, which rates the stock at ‘buy’, said it was well placed to weather any potential consumer weakness in the UK and continue to see significant growth in its services strategy.

On the downside, Hikma Pharmaceuticals slumped as it went ex-dividend, followed by BHP Billiton.

AstraZeneca was in the red after saying it has completed its commercialisation agreement with Aspen Global Incorporated, for rights to its global anaesthetics portfolio outside the US.

Market Movers

FTSE 100 (UKX) 6,745.97 -0.52%
FTSE 250 (MCX) 17,849.63 0.66%
techMARK (TASX) 3,419.89 -0.66%

FTSE 100 - Risers

GKN (GKN) 325.30p 4.60%
Berkeley Group Holdings (The) (BKG) 2,775.00p 3.85%
Taylor Wimpey (TW.) 165.60p 2.67%
Persimmon (PSN) 1,870.00p 2.52%
ITV (ITV) 205.50p 2.39%
3i Group (III) 629.00p 2.36%
Lloyds Banking Group (LLOY) 60.64p 2.17%
easyJet (EZJ) 1,129.00p 2.17%
Hammerson (HMSO) 591.50p 1.98%
Associated British Foods (ABF) 3,100.00p 1.94%

FTSE 100 - Fallers

Hikma Pharmaceuticals (HIK) 2,078.00p -2.90%
Vodafone Group (VOD) 223.35p -2.83%
GlaxoSmithKline (GSK) 1,599.50p -2.41%
Royal Dutch Shell 'B' (RDSB) 1,900.00p -2.16%
Royal Dutch Shell 'A' (RDSA) 1,820.50p -2.15%
BP (BP.) 418.75p -2.14%
Mediclinic International (MDC) 1,002.00p -1.96%
AstraZeneca (AZN) 4,821.00p -1.79%
TUI AG Reg Shs (DI) (TUI) 1,046.00p -1.60%
Centrica (CNA) 228.90p -1.59%

FTSE 250 - Risers

Allied Minds (ALM) 344.30p 6.00%
Sports Direct International (SPD) 315.00p 5.95%
Diploma (DPLM) 880.00p 5.90%
IP Group (IPO) 200.00p 5.26%
Safestore Holdings (SAFE) 390.70p 4.94%
Workspace Group (WKP) 718.50p 4.66%
Mitchells & Butlers (MAB) 268.00p 4.24%
Hochschild Mining (HOC) 250.80p 4.24%
PayPoint (PAY) 1,021.00p 4.18%
Brewin Dolphin Holdings (BRW) 275.30p 3.85%

FTSE 250 - Fallers

Ascential (ASCL) 255.00p -3.77%
JRP Group (JRP) 94.95p -3.11%
Vectura Group (VEC) 127.00p -3.05%
Stagecoach Group (SGC) 220.80p -2.99%
CMC Markets (CMCX) 277.60p -2.39%
Grafton Group Units (GFTU) 535.00p -2.28%
Tullett Prebon (TLPR) 373.80p -2.02%
G4S (GFS) 226.30p -1.86%
Evraz (EVR) 126.00p -1.56%
CYBG (CYBG) 265.90p -1.48%