London close: Stocks end higher after China rate cuts, positive PMIs

The FTSE ended the week on a high note after China’s central bank cut key rates and as better-than-expected manufacturing reports in the Eurozone and the US boosted investor confidence.

The People’s Bank of China said it will cut its one-year deposit rate and one-year lending rate by 25 basis points each to 1.5% and 4.35%, respectively.

The PBoC also cut the reverse requirement ratio for all banks by 50 basis points to 17.5%, with an extra 50 bps reduction for some lenders.

“These moves come after clear signs of weakness in the economy in recent months. Amid continued capital outflow and falling CPI inflation, we believe these cuts may be necessary to prevent a tightening of financial conditions,” said analysts at Goldman Sachs.

Earlier in China the latest survey from the Conference Board showed its index rose 1.6% month-on-month in September compared with a 1% gain in August and a 0.9% climb in July. The coincident index slid 1.2% after rising 0.7% in August and 1% in July.

Manufacturing data, ECB stimulus

The Eurozone manufacturing purchasing managers’ index held at 52 in October compared to a month ago, beating expectations for a reading of 51.7, Markit revealed. A reading above 50 signals expansion in sector activity.

Separately, Markit’s US manufacturing PMI rose from 53.1 in September to 54 in October, comfortably above the 52.9 reading analysts had expected.

Meanwhile, the market continued to digest Thursday’s European Central Bank press conference where president Mario Draghi hinted at further stimulus to address prolonged low inflation amid concerns about risks from China and falling commodity prices.

Draghi said policymakers would re-examine the ECB’s €60bn a month asset purchase programme in December and consider extending it past September 2016 if needed. He also revealed that the central bank had also discussed furthering lowering the deposit rate, although there was "no specific preference to one instrument or the other, they were all considered".

"Strong ECB easing in December also limits the chances the Fed will hike at the same time, pushing a lift-off further into 2016,” said RBS analysts.

TalkTalk under pressure

Market Movers

FTSE 100 (UKX) 6,444.08 1.06%
FTSE 250 (MCX) 17,240.70 1.15%
techMARK (TASX) 3,107.42 1.44%

FTSE 100 - Risers

Travis Perkins (TPK) 1,939.00p 5.09%
Shire Plc (SHP) 4,641.00p 4.41%
WPP (WPP) 1,478.00p 4.16%
Aberdeen Asset Management (ADN) 351.40p 4.09%
Burberry Group (BRBY) 1,351.00p 4.00%
Fresnillo (FRES) 758.00p 3.84%
Schroders (SDR) 2,961.00p 3.82%
Johnson Matthey (JMAT) 2,581.00p 3.65%
Dixons Carphone (DC.) 458.20p 3.59%
ARM Holdings (ARM) 1,073.00p 3.47%

FTSE 100 - Fallers

Pearson (PSON) 900.50p -5.21%
BG Group (BG.) 1,057.00p -2.31%
Royal Dutch Shell 'B' (RDSB) 1,775.50p -1.53%
Royal Dutch Shell 'A' (RDSA) 1,762.50p -1.37%
Reckitt Benckiser Group (RB.) 6,249.00p -0.97%
TUI AG Reg Shs (DI) (TUI) 1,208.00p -0.58%
Sage Group (SGE) 540.00p -0.46%
British Land Company (BLND) 865.50p -0.46%
Imperial Tobacco Group (IMT) 3,502.00p -0.31%
Inmarsat (ISAT) 976.00p -0.31%

FTSE 250 - Risers

Petra Diamonds Ltd.(DI) (PDL) 90.10p 7.58%
Ocado Group (OCDO) 370.80p 6.98%
Cable & Wireless Communications (CWC) 74.60p 6.57%
Carillion (CLLN) 319.70p 6.50%
Allied Minds (ALM) 447.30p 5.52%
AA (AA.) 276.50p 5.33%
Henderson Group (HGG) 283.50p 5.08%
Clarkson (CKN) 2,525.00p 4.34%
Man Group (EMG) 166.40p 4.33%
BBA Aviation (BBA) 206.20p 4.30%

FTSE 250 - Fallers

William Hill (WMH) 318.00p -7.93%
Home Retail Group (HOME) 112.70p -6.08%
Micro Focus International (MCRO) 1,170.00p -4.96%
TalkTalk Telecom Group (TALK) 256.80p -4.36%
Premier Oil (PMO) 74.80p -3.48%
Tullow Oil (TLW) 212.30p -2.84%
SIG (SHI) 137.60p -2.76%
Indivior (INDV) 209.00p -1.88%
Tullett Prebon (TLPR) 341.60p -1.84%
Sophos Group (SOPH) 257.90p -1.71%

Glencore and Fresnillo were among the top rises on the FTSE 100, lifted by the PBoC’s announcement.

Travis Perkins rebounded after it said on Thursday that its full-year earnings are likely to be at the lower end of market expectations due to weakness in the repair, maintenance and improvement market. On Friday, Citigroup upgraded the stock to ‘buy’.

TalkTalk was under pressure after saying a criminal investigation was launched by the Metropolitan Police cyber crime unit on Thursday following a “significant and sustained” cyberattack on the company’s website.

Pearson slipped after Exane BNP Paribas downgraded the stock to ‘neutral’ from ‘outperform’ and cut the price target to 1,000p.

Carillion got a boost as JPMorgan Cazenove upgraded its stance on the construction and support services company to ‘overweight’ from ‘neutral’ as it took a look at UK contractors.

Debenhams was a high riser again after it posted growth in annual pre-tax profit on Thursday thanks to solid progress made against its strategic targets.

William Hill slumped after the bookie warned that full-year operating profit will come in at the bottom end of analysts’ forecasts as a result of additional taxes on the gambling industry and a tough comparison with last year.