London midday: FTSE nudges up; manufacturing output falls to nine-month low

London stocks had nudged higher by midday on Monday as investors mulled a raft of UK data releases, but housebuilders were under the cosh after a series of broker downgrades.

The FTSE 100 was up 0.1% at 8,298.87.

A survey released earlier showed that manufacturing activity fell to a nine-month low in November as new orders fell.

The S&P Global manufacturing purchasing managers’ index fell to 48.0 from 49.9 in October. This was below the flash estimate of 48.6 and below the 50.0 mark that separates contraction from expansion.

Survey respondents linked declines in output and new orders to delayed investment decisions, cutbacks to new projects due to domestic market uncertainty and rising geopolitical tensions. Some firms also said announcements in the UK Budget had led to budgets being re-appraised at manufacturers and their clients alike.

Rob Dobson, director at S&P Global Market Intelligence, said concerns about the economic outlook, high costs and weak demand led to lower output, falling orders and cutbacks to purchasing, jobs and inventory holdings.

"The export climate also remained bleak, as weaker demand from the US, China and EU led to a further drop in new export business. While companies of all sizes are experiencing a downturn, small companies are the hardest hit, reporting especially marked drops in output, new orders and new export business," he said.

"Meanwhile, supply chain worries have intensified as the combination of the Red Sea crisis, port disruptions and border regulation issues led to longer supplier delivery times, input shortages and rising costs. Input price inflation accelerated as a result."

Figures from Nationwide were also in focus. They showed that house prices rose 3.7% on the year November, up from 2.4% the month before. This marked the fastest annual growth since November 2022.

On the month, they were up 1.2%, having risen just 0.1% in October. This was the largest monthly gain since March 2022.

Nationwide chief economist Robert Gardner said: "The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels."

Investors were also mulling the latest Confederation of British Industry Growth Indicator, which showed that UK companies expect 2025 to get off to a poor start, weighed down by rising labour costs and weak sentiment.

Away from home, the latest data from Caixin and S&P Global showed that China’s manufacturing sector grew at its fastest rate in five months in November. The manufacturing PMI rose to 51.5 from 50.3 in October, coming in ahead of the 50.5 consensus forecast.

This was the second straight month of expansion, helped by the highest rate of growth in foreign orders since February 2023.

Market participants were also keeping an eye on political developments in France, amid the threat of government collapse.

Kathleen Brooks, research director at XTB, said: "On Sunday, Marine Le Pen said that her party’s talks with the government led by Michel Barnier, had broken down, which paves the way for a no-confidence vote in the technocratic government that has no majority in Parliament. The no-confidence vote could come as early as Wednesday.

"If Barnier loses this vote, and at this stage it is very hard to see how he could win the vote, then European political woes could be front and centre as we move towards 2025. An election is expected to take place in Germany in February, however there cannot be another election in France until July next year, which opens the door to months of political struggle and inertia as the country tries to deal with its budget deficit, which is more than 6% of GDP."

In equity markets, housebuilders Persimmon and Vistry both slumped after downgrades to ‘underperform’ from ‘sector perform’ at RBC Capital Markets.

As far Persimmon is concerned, RBC said third-quarter commentary on build costs and building regulation planning changes lead it to believe that the embedded margins in its landbank may be at risk of downgrades come the full-year results.

"It has invested in build and quality, but housebuilding is not a zero-sum game, and lower margins may lead to a lower premium for Persimmon in 2025," it said.

It noted that Vistry has issued two profit warnings in as many months. "Whilst we are not saying things necessarily come in threes we believe that whilst provisions and cost calculations remain unaudited there are risks to the downside," RBC said.

"In addition, with many of its peers trading below book value we believe that the risk/reward trade-off has not moved in Vistry's favour."

Taylor Wimpey also fell even as RBC retained its ‘outperform’ rating on the stock, saying it continues to believe it’s is one of the UK's best placed housebuilders to take advantage of planning reform.

BAE Systems was firmer as Citi reiterated its ‘buy’ recommendation on the shares after they slumped on Friday on the back of a downgrade by Bank of America Merrill Lynch.

Outside the FTSE 350, AIM-listed Supreme rallied after it bought Typhoo Tea out of administration for £10.2m in cash.

Market Movers

FTSE 100 (UKX) 8,298.87 0.14%
FTSE 250 (MCX) 20,764.65 -0.03%
techMARK (TASX) 4,688.85 0.14%

FTSE 100 - Risers

Spirax Group (SPX) 7,305.00p 1.88%
Kingfisher (KGF) 250.70p 1.29%
Rolls-Royce Holdings (RR.) 565.60p 1.25%
Anglo American (AAL) 2,551.00p 1.21%
M&G (MNG) 200.20p 1.01%
BT Group (BT.A) 160.75p 0.91%
Diploma (DPLM) 4,500.00p 0.90%
BAE Systems (BA.) 1,238.00p 0.90%
Bunzl (BNZL) 3,588.00p 0.84%
Associated British Foods (ABF) 2,216.00p 0.82%

FTSE 100 - Fallers

Vistry Group (VTY) 633.00p -3.51%
Persimmon (PSN) 1,232.50p -2.03%
Taylor Wimpey (TW.) 128.80p -1.68%
Intertek Group (ITRK) 4,648.00p -1.44%
easyJet (EZJ) 545.60p -1.30%
LondonMetric Property (LMP) 191.70p -1.19%
Auto Trader Group (AUTO) 830.00p -1.07%
Unite Group (UTG) 873.00p -1.02%
B&M European Value Retail S.A. (DI) (BME) 343.50p -0.98%
Land Securities Group (LAND) 597.50p -0.91%

FTSE 250 - Risers

Spirent Communications (SPT) 180.20p 5.20%
CMC Markets (CMCX) 288.00p 4.16%
Watches of Switzerland Group (WOSG) 478.60p 2.92%
Bakkavor Group (BAKK) 141.50p 2.91%
Johnson Matthey (JMAT) 1,397.00p 2.80%
Bodycote (BOY) 635.00p 2.42%
Ithaca Energy (ITH) 106.40p 2.31%
Asia Dragon Trust (DGN) 429.00p 2.14%
W.A.G Payment Solutions (WPS) 82.60p 1.98%
Foresight Environmental Infrastructure Limited (FGEN) 77.00p 1.85%

FTSE 250 - Fallers

Indivior (INDV) 857.00p -3.16%
Dr. Martens (DOCS) 66.95p -2.97%
Close Brothers Group (CBG) 217.20p -2.95%
Foresight Group Holdings Limited NPV (FSG) 409.00p -2.15%
Hochschild Mining (HOC) 209.50p -2.10%
PureTech Health (PRTC) 164.20p -1.56%
Endeavour Mining (EDV) 1,520.00p -1.55%
Elementis (ELM) 131.40p -1.50%
Bank of Georgia Group (BGEO) 4,615.00p -1.49%
Great Portland Estates (GPE) 297.50p -1.49%