London midday: Stocks fall as pound rises on UK PMI data

London stocks fell on Thursday as the pound strengthened and shares of commodity producers continued to slump.

The pound jumped 0.84% against the dollar to $1.3240 and surged 1.18% versus the euro to €1.1885 after data showed UK manufacturing activity improved more than expected in August.

The Markit/CIPS UK manufacturing purchasing managers’ index climbed to a 10-month high of 53.3, recovering from the 41-month low of 48.3 in July following the EU referendum. Economists had been expecting a reading of 49.0. A level above 50.0 signals an expansion in sector activity while a reading below that indicates a contraction.

Connor Campbell, financial analyst at Spreadex, said: “In one of those instances of contradictory market nonsense the surprise manufacturing PMI sent the pound sharply higher (to the tune of 1%) against both the dollar and the euro despite the fact that the survey underwent such an increase thanks to sterling’s sustained weakness across August causing a swell in cheaper exports.

“The pound’s push also saw the FTSE lose its, something that wasn’t helped by a few flashes of red cropping up in the mining sector, causing the index to fall by 0.1% compared to the half a percent surge it saw at the start of the session.”

Elsewhere, China’s official manufacturing PMI rose to 50.4 in August from 49.9 a month earlier. Analysts had expected no change to the reading.

The Caixin China manufacturing PMI, a separate private gauge of activity in the sector, dropped to 50.0 in August from 50.6 in July.

The official PMI for non-manufacturing was also released, showing a drop to 53.5 in August from 53.9 in July.

“The latest Chinese manufacturing PMI surveys for August did offer up some optimism even though the Caixin measure slowed to 50.0, down from 50.6,” said Michael Hewson, chief market analyst at CMC Markets.

“The official measure improved slightly to 50.4, almost a two year high, which is encouraging after a fashion, though if 50.4 is a cause for celebration then it merely goes to show that investors are clutching at straws.”

In the eurozone, Markit’s final eurozone manufacturing PMI came in at 51.7 in August, marking a three-month low. This was down from the flash estimate of 51.8 and July’s reading of 52.0.

Still, the PMI has now signalled growth for 38 consecutive months, marking a continuation of its survey-record unbroken sequence above the 50.0 stagnation mark.

Looking ahead, US manufacturing PMIs from Markit and ISM will be released at 1445 BST and 1500 BST respectively. US initial jobless claims are also due at 1330 BST, while US construction spending figures will be published at 1500 BST.

In corporate news, recruiter Hays was in the red despite reporting a rise in profit for the year to the end of June as net fee income grew. The company said it was too early to gauge how Brexit will affect the business.

Housebuilders led the gains on the FTSE, a day after Nationwide revealed UK house prices rose more than expected in August despite Brexit uncertainty. Taylor Wimpey, Persimmon and Berkeley Group were among the biggest risers.

AstraZeneca shares fell as part of a sector-wide decline as it announced the completion of its commercialisation agreement with Aspen Global Incorporated, for rights to its global anaesthetics portfolio outside the US.

Fellow drugmaker Hikma Pharmaceuticals was also sitting lower as it went ex-dividend.

Joining Hikma on going ex-dividend, Stagecoach and Aggreko’s shares dropped.

Payment solutions provider Paysafe pushed up after acquiring affiliate technology business Income Access Group for a cash consideration of CAD40m.

Dixons Carphone rallied as Deutsche Bank reiterated a ‘buy’ rating and a target price of 420p, saying it expects its third quarter results next week to show UK sales continued to grow as it shrugged off the impact of Brexit.

Grafton Group was under the cosh as Canaccord Genuity cut its rating on the stock to ‘hold’ from ‘buy’ and lowered its target price to 595p from 640p.

Shares in oil producers, including Royal Dutch Shell, BP and BHP Billiton, slid as oil prices continued to slip after official data on Wednesday showed a bigger-than-expected increase in weekly crude inventories. Brent crude dropped 0.29% to $46.75 per barrel and West Texas Intermediate edged down 0.06% to $44.67 per barrel at 1137 BST.

Market Movers

FTSE 100 (UKX) 6,784.92 0.05%
FTSE 250 (MCX) 17,876.48 0.81%
techMARK (TASX) 3,436.16 -0.18%

FTSE 100 - Risers

Taylor Wimpey (TW.) 167.80p 3.91%
Berkeley Group Holdings (The) (BKG) 2,777.00p 3.67%
Persimmon (PSN) 1,893.00p 3.56%
Lloyds Banking Group (LLOY) 61.27p 3.25%
Barratt Developments (BDEV) 509.50p 3.24%
3i Group (III) 631.50p 2.77%
Provident Financial (PFG) 3,088.00p 2.66%
easyJet (EZJ) 1,133.00p 2.44%
International Consolidated Airlines Group SA (CDI) (IAG) 392.90p 2.38%
Dixons Carphone (DC.) 379.40p 2.19%

FTSE 100 - Fallers

Hikma Pharmaceuticals (HIK) 2,088.00p -2.15%
Vodafone Group (VOD) 225.60p -1.85%
Royal Dutch Shell 'B' (RDSB) 1,908.50p -1.60%
Fresnillo (FRES) 1,580.00p -1.56%
AstraZeneca (AZN) 4,835.00p -1.51%
Mediclinic International (MDC) 1,009.00p -1.37%
Randgold Resources Ltd. (RRS) 7,060.00p -1.26%
GlaxoSmithKline (GSK) 1,617.50p -1.16%
Royal Dutch Shell 'A' (RDSA) 1,839.00p -1.10%
Bunzl (BNZL) 2,334.00p -1.06%

FTSE 250 - Risers

Allied Minds (ALM) 356.90p 9.88%
Daejan Holdings (DJAN) 5,625.00p 4.75%
PayPoint (PAY) 1,026.00p 4.69%
Rank Group (RNK) 225.80p 4.54%
Sports Direct International (SPD) 307.90p 4.17%
Brown (N.) Group (BWNG) 212.30p 4.12%
Bovis Homes Group (BVS) 933.50p 4.07%
Redrow (RDW) 386.80p 4.06%
Crest Nicholson Holdings (CRST) 483.90p 4.00%
Bellway (BWY) 2,424.00p 3.99%

FTSE 250 - Fallers

Ascential (ASCL) 254.10p -4.26%
Vectura Group (VEC) 126.30p -3.59%
Stagecoach Group (SGC) 220.80p -2.99%
Centamin (DI) (CEY) 144.80p -2.49%
Aggreko (AGK) 997.00p -2.26%
Hays (HAS) 128.30p -2.14%
Polymetal International (POLY) 1,029.00p -2.09%
Grafton Group Units (GFTU) 538.00p -1.83%
Acacia Mining (ACA) 453.20p -1.63%
CMC Markets (CMCX) 279.80p -1.62%