London close: FTSE ends slightly higher as traders weigh Brexit debate, PMIs

The FTSE 100 closed slightly higher but erased most its gains from earlier in the session as the pound strengthened.

The index rose 0.12% to 7,102.73 points while the pound climbed 0.92% against the euro to €1.1756 and increased 0.48% versus the dollar to $1.2640.

“It appears that the FTSE is once again being plagued by the pound’s recovery; sterling jumped half a percent against both the dollar and the euro, supported by leaked reports suggesting the EU will suffer from a bad Brexit deal thanks to its ties to the City of London,” said Connor Campbell, financial analyst at Spreadex.

A leaked report seen by The Guardian showed London’s economy and those of the remaining member states of the EU will be mutually damaged if Britain fails to secure a “workable” Brexit deal. The report - written by officials working for the European parliament’s committee on economic and monetary affairs - said a bad deal for London would result in a bad deal for the rest of the EU since UK-based financial services account for 40% of Europe's assets under management and 60% of its capital markets business.

Meanwhile, members of parliament continued to debate the Brexit bill on whether to trigger Article 50. During the second day of the debate in parliament on Wednesday, Sir Ivan Rogers said the European Commission expects a figure "of the order of €40-60bn" for leaving the EU, adding that a free trade deal with the bloc would be the "most complex" agreement ever.

Former Chancellor George Osborne also accused Prime Minister Theresa May of not protecting the economy ahead of Brexit and instead prioritising immigration control. Downing Street responded by saying Osborne "speaks for himself."

Separately, at the Prime Minister Questions, Theresa May confirmed that a white paper on the government’s plans for Brexit will be published on Thursday.

In other UK news, investors were digesting manufacturing data.

IHS Markit’s UK manufacturing purchasing managers’ index for January fell to 55.9 from December's two-and-a-half-year high of 56.1, exactly in line with forecasts. A reading above 50 signals expansion in sector activity.

In the Eurozone, Markit’s final manufacturing PMI printed at 55.2 in January, up from the flash estimate of 55.1 and December’s reading of 54.9.

Earlier, figures released in China showed manufacturing in January expanded at close to its fastest pace in two years. China's official manufacturing PMI came in at 51.3, down a touch from 51.4 in December but beating expectations for a reading of 51.2.

In Japan, a survey revealed manufacturing was at its highest level in nearly three years. The final Markit/Nikkei Japan manufacturing purchasing managers' index came in at a seasonally-adjusted 52.7, a touch below the flash reading of 52.8 but higher than December’s final reading of 52.4.

In the US, Markit’s manufacturing PMI came in at in at 55.0 in January, below the 55.1 forecasts, and unchanged from the previous month.

The ISM manufacturing PMI rose to a reading of 56.0 in January from 54.5 in December, above the consensus of 55.0.

Traders were also digesting the US ADP employment report, widely seen as a precursor to Friday’s non-farm payrolls.

The data showed employers added 246,000 jobs last month, beating forecasts for a more modest 165,000 increase. Meanwhile, private payroll gains for December were revised down to 151,000 from a 153,000 gain initially reported.

Still to come, the Federal Reserve announces its latest policy decision at 1900 GMT. Analysts expect the central bank will keep interest rates unchanged but will be looking for clues in the policy statement on when the Fed plans to next hike rates.

“In the absence of a press conference with Chair Janet Yellen following today’s announcement, investors will be left to pour over the statement that it released alongside the decision to see whether views have changed on the path of interest rates this year since the last meeting,” said Craig Erlam, senior market analyst at Oanda.

“Given that the Fed is none-the-wiser when it comes to Trump’s spending and tax plans, I would imagine the views of policy makers will be unchanged since the middle of December and they will reiterate an intention to hike three times.”

In corporate news, pharmaceutical stocks Hikma and Shire were in the black after US President Donald Trump provided a boost to the sector after saying he would help drug makers by speeding up the approval of new medicines and cutting taxes.

Smiths Group was on the front foot after the engineer said the trustee of its TI Group Pension Scheme has entered into a bulk annuity buy-in agreement with specialist insurer of defined benefit pension funds Pension Insurance Corporation.

Dixons Carphone was weaker after the retailer said Ian Livingston will succeed Charles Dunstone as chairman on 30 April, allowing Dunstone to take up the role of executive chairman at TalkTalk.

TalkTalk rallied as investors cheered news that chief executive Dido Harding was stepping down, and as the company said revenue and earnings for the current financial year would be affected by re-contracting activity, but will be in line with previous guidance.

Eastern Europe focused airline Wizz Air flew lower after cutting its underlying net profit guidance for the full year despite reporting a surge in third-quarter profit, on the back of lower fuel prices and severe weather conditions.

Hochschild Mining fell after suspending operations at its Inmaculada mine in southern Peru following a fatal accident involving two contractors on Tuesday.

Market Movers

FTSE 100 (UKX) 7,107.65 0.12%
FTSE 250 (MCX) 18,240.20 0.51%
techMARK (TASX) 3,246.22 0.63%

FTSE 100 - Risers

Hikma Pharmaceuticals (HIK) 1,880.00p 3.07%
Pearson (PSON) 637.50p 2.99%
Barratt Developments (BDEV) 490.00p 2.57%
Micro Focus International (MCRO) 2,198.00p 2.38%
International Consolidated Airlines Group SA (CDI) (IAG) 486.60p 2.08%
Shire Plc (SHP) 4,466.50p 1.99%
Prudential (PRU) 1,557.50p 1.66%
Taylor Wimpey (TW.) 169.70p 1.56%
Aviva (AV.) 484.20p 1.53%
Morrison (Wm) Supermarkets (MRW) 239.60p 1.48%

FTSE 100 - Fallers

Provident Financial (PFG) 2,642.00p -3.05%
Mediclinic International (MDC) 761.50p -2.99%
Randgold Resources Ltd. (RRS) 6,615.00p -2.07%
Severn Trent (SVT) 2,233.00p -1.63%
United Utilities Group (UU.) 903.00p -1.53%
National Grid (NG.) 913.70p -1.51%
DCC (DCC) 6,300.00p -1.49%
Dixons Carphone (DC.) 312.50p -1.08%
Compass Group (CPG) 1,397.00p -1.06%
Associated British Foods (ABF) 2,361.00p -1.05%

FTSE 250 - Risers

TalkTalk Telecom Group (TALK) 168.40p 7.60%
Evraz (EVR) 235.20p 5.47%
Ferrexpo (FXPO) 160.10p 5.33%
Sports Direct International (SPD) 298.40p 5.07%
Brown (N.) Group (BWNG) 227.70p 4.16%
Kaz Minerals (KAZ) 488.00p 3.76%
Assura (AGR) 53.95p 3.75%
Marshalls (MSLH) 298.40p 3.53%
Debenhams (DEB) 54.40p 3.52%
Jupiter Fund Management (JUP) 415.20p 3.41%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 1,616.00p -9.26%
Ocado Group (OCDO) 242.60p -2.73%
Henderson Group (HGG) 212.10p -2.71%
Acacia Mining (ACA) 420.30p -2.37%
Hochschild Mining (HOC) 241.00p -2.23%
Allied Minds (ALM) 390.00p -2.03%
Hastings Group Holdings (HSTG) 220.40p -1.87%
CMC Markets (CMCX) 109.10p -1.62%
Aberdeen Asset Management (ADN) 258.10p -1.53%
Halma (HLMA) 913.50p -1.24%