London midday: Stocks climb as traders assess Eurozone PMI

London stocks climbed on Tuesday as the Eurozone composite purchasing managers’ index unexpectedly nudged up to a seven-month high in August.

The composite PMI printed at 53.3 compared to 53.2 the month before, beating expectations for it to edge down to 53.1. A reading above 50 signals expansion in activity while a level below that suggests a contraction.

The services PMI rose to 53.1 from 52.9 in July, which was a three-month high and ahead of expectations for a reading of 52.8.

Meanwhile, the manufacturing PMI slipped to 51.8 from 52.0, missing forecasts for it to be unchanged and reaching a three-month low.

Chris Williamson, chief business economist at IHS Markit, said: “The August flash PMI indicates that the eurozone remains on a steady growth path in the third quarter, with no signs of the recovery being derailed by ‘Brexit’ uncertainty.

“While the resilience of the PMI in August will add to the belief that the ECB will see no need for any immediate further stimulus, the weakness of the overall pace of expansion and disappointing trends in hiring, order books, business optimism and prices all suggest that policymakers will keep the door open for more stimulus later in the year.”

In the UK, the CBI said manufacturers continued to struggle in August but orders were stronger than expected. The business lobby group’s monthly industrial trends survey gave a total order book reading of -5%, which was much better than the -10% expected by economists. July's reading was -4.

"It’s good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders. But the pound’s weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices," said Anna Leach, CBI head of economic analysis and surveys.

"The most significant effects of the vote to leave the EU will flow over the medium to long-term. Therefore firms need to see ambitious decisions in the Autumn Statement that will secure the UK’s economic future as changes to trade, regulation and access to skills loom on the horizon."

Next up, Markit’s PMI on US manufacturing will be released at 1445 BST, followed by US new home sales figures at 1500 BST.

The week’s main event, however, is the Federal Reserve’s annual conference in Jackson Hole on Friday. Analysts will be hoping Fed Chair Janet Yellen sheds light on the timing of the next interest rate hike, following hawkish remarks from policymakers last week.

“Investors are still not buying a 2016 rate hike, even following Stanley Fischer’s comments over the weekend regarding the economy – markets now marginally pricing in February - so the probability that Yellen says something that goes against what’s priced in seems quite high,” said Craig Erlam, senior market analyst at Oanda.

“The only question is whether she’ll strongly hint at a hike this year or indicate that holding off to early next year may be warranted, at which point markets would push the hike right back once again.”

Meanwhile, oil prices continued to decline on doubts that the Organization of the Petroleum Exporting Countries would reach a deal to cut production at a meeting next month. Reports that Iraq – OPEC’s second-biggest producer – was set to ramp up its exports also weighed on the market.

Brent crude fell 1.15% to $48.60 per barrel and West Texas Intermediate edged down 1.17% to $46.86 per barrel at 1127 BST.

Among corporate stocks, Persimmon shares jumped after it reported a better-than-expected jump in first half pre-tax profit as the housebuilder shrugged off Brexit uncertainty.

Other housebuilders followed suit with shares in Barratt Developments, Taylor Wimpey and Berkeley Group all in the black.

Tesco rallied after Kantar Worldpanel said sales in the 12 weeks ending on 14 August fell 0.4%, albeit at the slowest rate of decline in six months. Fraser McKevitt, head of retail and consumer insight at Kantar, said the drop in Tesco's sales - stretching back to March 2015 - might be about to hit bottom, with the grocer possibly returning to growth in 2016.

JRP Group surged after saying trading to the end of July since its update on 11 May continued in line with expectations. The company said it continued to be well-capitalised, with its solvency capital II capital ratio standing at roughly 130% as of 30 June. Its merger also continues to “progress well”.

Kier Group was a high riser after being awarded three major UK construction frameworks totalling more than £5bn.

Paddy Power Betfair was on the back foot after Investec reiterated a ‘sell’ rating and a set a target price of 9,170p, saying this now indicates a potential 6.38% drop from the betting company’s current price of 9,795p.

Market Movers

FTSE 100 (UKX) 6,862.32 0.49%
FTSE 250 (MCX) 17,990.36 0.66%
techMARK (TASX) 3,520.19 0.28%

FTSE 100 - Risers

Persimmon (PSN) 1,879.00p 4.74%
Barratt Developments (BDEV) 479.90p 3.54%
Royal Bank of Scotland Group (RBS) 194.50p 3.35%
Taylor Wimpey (TW.) 164.00p 3.34%
Tesco (TSCO) 164.45p 3.10%
Anglo American (AAL) 859.10p 2.89%
Berkeley Group Holdings (The) (BKG) 2,622.00p 2.82%
BHP Billiton (BLT) 1,060.00p 2.61%
Standard Life (SL.) 358.60p 2.49%
Travis Perkins (TPK) 1,618.00p 2.21%

FTSE 100 - Fallers

Mediclinic International (MDC) 1,073.00p -1.20%
London Stock Exchange Group (LSE) 2,864.00p -0.80%
Royal Dutch Shell 'A' (RDSA) 1,889.00p -0.63%
Compass Group (CPG) 1,486.00p -0.60%
Royal Dutch Shell 'B' (RDSB) 1,964.50p -0.48%
CRH (CRH) 2,496.00p -0.48%
Hikma Pharmaceuticals (HIK) 2,303.00p -0.39%
Old Mutual (OML) 203.20p -0.34%
National Grid (NG.) 1,079.50p -0.14%
InterContinental Hotels Group (IHG) 3,326.00p -0.12%

FTSE 250 - Risers

JRP Group (JRP) 103.70p 17.51%
McCarthy & Stone (MCS) 192.00p 6.67%
Bellway (BWY) 2,337.00p 5.13%
Grafton Group Units (GFTU) 569.00p 4.88%
Kier Group (KIE) 1,241.00p 4.37%
Countrywide (CWD) 255.60p 4.03%
Thomas Cook Group (TCG) 68.85p 3.92%
Redrow (RDW) 369.10p 3.39%
Bovis Homes Group (BVS) 888.50p 3.37%
Galliford Try (GFRD) 1,116.00p 3.33%

FTSE 250 - Fallers

Evraz (EVR) 137.50p -4.25%
Synthomer (SYNT) 371.30p -1.67%
Wizz Air Holdings (WIZZ) 1,565.00p -1.45%
Just Eat (JE.) 581.00p -1.19%
RIT Capital Partners (RCP) 1,760.00p -1.18%
Rightmove (RMV) 4,211.00p -1.17%
Diploma (DPLM) 848.50p -1.05%
NMC Health (NMC) 1,284.00p -0.77%
Vectura Group (VEC) 142.90p -0.76%
Fidelity European Values (FEV) 175.90p -0.62%