London close: Stocks drop after weak UK PMI

London stocks dropped on Monday after data showed the UK manufacturing sector contracted more than expected in July amid uncertainty surrounding the EU referendum.

The Markit/CIPS UK manufacturing purchasing managers’ index fell to 48.2 from 52.4 in June and came in weaker than the flash estimate of 49.1, marking the lowest level since February 2013. A level below 50 signals a contraction in sector activity while a reading below that indicates an expansion.

David Morrison, senior market strategist at SpreadCo, said: “This latest reading provides the Bank’s MPC with further evidence of a post-Brexit slowdown and makes a rate cut at Thursday’s meeting pretty much inevitable.

“The only question now is whether they back up a 25 basis point cut with an increase to the asset purchase facility as well.”

The Bank of England is widely expected to cut interest rates for the first time in seven years when policymakers meet on Thursday. The Bank releases its August Inflation Report at the same time as the policy decision, which will provide more information on the impact on the EU referendum.

Elsewhere, China manufacturing data also came in weaker than expected. The official PMI fell to 49.9 in July from 50.0 a month earlier, surprising analysts who had expected no change.

In contrast, the private Caixin PMI on manufacturing rose to 50.6 in July from 48.6, beating forecasts of 48.9.

The eurozone manufacturing PMI from Markit nudged down to 52.0 in July from 52.8 in June. Still, the reading came in above the flash estimate of 51.9 and marked the 37th consecutive month of expansion.

The Institute for Supply Management’s index for US manufacturing fell to 52.5 in July from June’s 53.2, missing expectations for a reading of 53.0.

Markit’s final US manufacturing purchasing managers’ index rose to 52.9 in July from 51.3 in June, in line with the flash reading and analysts’ expectations.

“Janet Yellen will be pleased that the manufacturing numbers are holding somewhere close to June’s high watermark, showing that production in the US is in relatively rude health,” said Dennis de Jong, managing director at UFX.com.

“With encouraging job data and a strong dollar adding to the positive outlook for the world’s largest economy, thoughts at the Fed will be back to whether an interest rate rise could now be on the cards.”

In corporate news, housebuilders were under pressure after the weak UK manufacturing PMI, including Taylor Wimpey, Barratt Developments and Persimmon.

Anglo American got a boost as RBC Capital Markets upgraded the stock to ‘outperform’ from ‘sector perform’ and lifted the price target to 1,000p from 800p saying the tide is turning for the investment case.

Shire gained as it received US regulatory approval for an improved haemophilia-A treatment developed by recently acquired Baxalta.

Morrison slumped as it cut prices on more than 1,000 products by an average of 18% on Monday to address fierce competition between supermarkets and small discounters.

Acacia Mining rallied as it said it has continued to enhance and expand its exploration portfolio through an agreement to accelerate the earn-in on the West Kenya Joint Venture licences in Kenya.

Keller Group plunged as the company guided markets towards the lower end of full year expectations despite record interim revenues of £850m, up 12%.

Royal Dutch Shell was under the cosh on reports its Trans Ramos Pipeline was attacked by suspected militants in Nigeria’s Delta.

Market Movers

FTSE 100 (UKX) 6,693.95 -0.45%
FTSE 250 (MCX) 17,139.21 -0.83%
techMARK (TASX) 3,469.55 -0.10%

FTSE 100 - Risers

Anglo American (AAL) 848.40p 2.16%
BHP Billiton (BLT) 963.30p 1.97%
Associated British Foods (ABF) 2,737.00p 1.71%
Hikma Pharmaceuticals (HIK) 2,679.00p 1.71%
Direct Line Insurance Group (DLG) 355.10p 1.40%
Shire Plc (SHP) 4,925.00p 1.11%
Rio Tinto (RIO) 2,486.00p 1.00%
Compass Group (CPG) 1,449.00p 0.91%
Old Mutual (OML) 212.20p 0.76%
GlaxoSmithKline (GSK) 1,700.50p 0.74%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 147.70p -4.52%
Berkeley Group Holdings (The) (BKG) 2,576.00p -3.99%
Barratt Developments (BDEV) 424.10p -3.06%
Royal Dutch Shell 'A' (RDSA) 1,889.00p -2.83%
Persimmon (PSN) 1,640.00p -2.79%
Royal Dutch Shell 'B' (RDSB) 1,951.00p -2.55%
Morrison (Wm) Supermarkets (MRW) 181.50p -2.31%
Intertek Group (ITRK) 3,545.00p -2.21%
Barclays (BARC) 151.40p -2.04%
BP (BP.) 418.35p -1.99%

FTSE 250 - Risers

Senior (SNR) 226.30p 10.44%
Fidessa Group (FDSA) 2,538.00p 4.02%
Kaz Minerals (KAZ) 163.90p 4.00%
Rank Group (RNK) 230.00p 3.37%
Acacia Mining (ACA) 578.00p 3.31%
Hochschild Mining (HOC) 275.00p 2.92%
Greggs (GRG) 1,060.00p 2.51%
Big Yellow Group (BYG) 725.00p 2.11%
Riverstone Energy Limited (RSE) 954.50p 2.09%
UDG Healthcare Public Limited Company (UDG) 593.50p 2.06%

FTSE 250 - Fallers

Keller Group (KLR) 910.00p -10.70%
Sophos Group (SOPH) 229.20p -7.95%
Countrywide (CWD) 231.50p -6.65%
Tullow Oil (TLW) 186.10p -5.87%
Vedanta Resources (VED) 543.00p -5.32%
Thomas Cook Group (TCG) 61.60p -5.23%
Mitchells & Butlers (MAB) 238.90p -5.12%
IP Group (IPO) 150.00p -4.82%
Marshalls (MSLH) 261.50p -4.70%
Crest Nicholson Holdings (CRST) 407.80p -4.56%