London midday: Stocks fall as pound strengthens after UK services data

London stocks dropped on Monday as the pound strengthened after better-than-expected UK services data.

The Markit/CIPS purchasing managers’ index on UK services rose to 52.9 in August from 47.4 in July, beating forecasts of 50.0. A reading above 50 signals an expansion while a level below that suggests a contraction.

The pound rose 0.23% against the dollar to $1.3325.

“The stronger pound took some of the shine off the FTSE 100, which had looked a touch overextended following Friday’s surge; with few big corporate releases this week the market might struggle, but a weaker US dollar will help commodity prices, lifting mining shares and helping to stem downside for London’s premier index, “said Chris Beauchamp, chief market analyst at IG.

Elsewhere, the Caixin/Markit China services PMI rose to 52.1 in August on a seasonally adjusted basis from 51.7 the previous month.

Caixin’s composite PMI, which combines services and manufacturing, fell slightly to 51.8 from 51.9 as it was dragged down by the struggling manufacturing sector.

In the Eurozone, Markit’s final composite PMI fell to 52.9 in August from 53.2 in July and was down a touch from the flash estimate of 53.3. The services PMI fell to 52.8 from July’s 52.9 and the flash estimate of 53.1.

Retail sales in the euro-area were up 1.1% on the month in July following a 0.1% drop in June. On the year, retail sales were up 2.9%. Analysts had expected a month-on-month rise of 0.5% and a year-on-year increase of 1.8%.

Looking ahead, Bank of England Governor Mark Carney will appear before the UK parliament's Treasury Committee on Wednesday. It will mark his first public appearance since the BoE boosted stimulus measures.

“Having eased early and aggressively, the MPC will doubtlessly be asked by lawmakers if they jumped the gun, and will have to once again justify their previous warnings about the potential effects of Brexit,” said Ranko Berich, head of market analysis at Monex Europe.

On the company front, Lloyds and Royal Bank of Scotland were under the cosh as Deutsche Bank downgraded the stocks to adjust for a “lower-for-longer” environment.

Deutsche downgraded RBS to ‘sell’ from ‘hold’ and cut the price target to 170p from 200p, saying said the bank was most at risk in the near/medium term due to already-low deposit rates (36bps), likely downgrades to loan growth, additional restructuring charges and the likely lack of a dividend until 2018.

It cut Lloyds to ‘hold’ from ‘buy’ and trimmed the price target to 59p from 60p, saying that while the bank should benefit in the near term from falling deposit costs and potential sub-debt redemptions, there are risks from re-mortgage churn in the medium to longer term.

On the upside, oil producers rallied as crude prices jumped after a report that Saudi Arabia and Russia made a joint statement at the G-20 about stabilising the market. Royal Dutch Shell, BP and BHP Billiton shares gained.

Brent crude edged up 2.6% to $48.08 per barrel and West Texas Intermediate advanced 2.5% to $45.58 per barrel at 1148 BST.

Randgold Resources shares rose as Numis upgraded its rating on the stock to ‘buy’ from ‘hold’ and left its target price at 9,000p.

Zoopla got a boost as Barclays upgraded the stock to ‘overweight’ from ‘equalweight’ and lifted the price target to 335p from 250p ahead of the investor day on 15 September

Market Movers

FTSE 100 (UKX) 6,881.42 -0.19%
FTSE 250 (MCX) 18,021.28 0.03%
techMARK (TASX) 3,469.31 -0.02%

FTSE 100 - Risers

Anglo American (AAL) 827.00p 2.35%
Paddy Power Betfair (PPB) 9,185.00p 1.89%
Randgold Resources Ltd. (RRS) 7,585.00p 1.61%
BHP Billiton (BLT) 1,011.50p 1.61%
Royal Dutch Shell 'A' (RDSA) 1,897.00p 1.42%
Royal Dutch Shell 'B' (RDSB) 1,978.00p 1.28%
BAE Systems (BA.) 555.00p 1.28%
Fresnillo (FRES) 1,689.00p 1.26%
Rio Tinto (RIO) 2,356.00p 1.25%
BP (BP.) 436.30p 1.23%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 198.20p -2.99%
Provident Financial (PFG) 3,026.00p -2.39%
Lloyds Banking Group (LLOY) 59.59p -2.23%
Imperial Brands (IMB) 4,044.50p -2.07%
Intu Properties (INTU) 307.60p -1.54%
Coca-Cola HBC AG (CDI) (CCH) 1,669.00p -1.53%
Tesco (TSCO) 169.20p -1.43%
Standard Life (SL.) 368.10p -1.42%
Whitbread (WTB) 4,229.00p -1.40%
Persimmon (PSN) 1,834.00p -1.40%

FTSE 250 - Risers

Zoopla Property Group (WI) (ZPLA) 330.30p 7.94%
Dechra Pharmaceuticals (DPH) 1,355.00p 4.23%
Acacia Mining (ACA) 502.50p 3.82%
DFS Furniture (DFS) 284.10p 3.31%
Evraz (EVR) 132.10p 3.28%
Kaz Minerals (KAZ) 183.50p 3.03%
Allied Minds (ALM) 339.20p 2.76%
Vedanta Resources (VED) 513.00p 2.74%
Cairn Energy (CNE) 197.30p 2.71%
Carillion (CLLN) 268.00p 2.64%

FTSE 250 - Fallers

Ibstock (IBST) 168.20p -3.05%
Redefine International (RDI) 42.28p -2.89%
Virgin Money Holdings (UK) (VM.) 308.80p -2.77%
Tritax Big Box Reit (BBOX) 144.40p -2.50%
Hastings Group Holdings (HSTG) 220.80p -2.47%
Greencore Group (GNC) 359.30p -2.23%
Countrywide (CWD) 261.80p -2.06%
Workspace Group (WKP) 704.50p -1.88%
Cranswick (CWK) 2,309.00p -1.83%
Bellway (BWY) 2,337.00p -1.72%

Market Movers

FTSE 100 (UKX) 6,880.63 -0.20%
FTSE 250 (MCX) 18,017.42 0.01%
techMARK (TASX) 3,469.57 -0.01%

FTSE 100 - Risers

Anglo American (AAL) 829.70p 2.69%
Paddy Power Betfair (PPB) 9,200.00p 2.05%
BHP Billiton (BLT) 1,011.00p 1.56%
BAE Systems (BA.) 555.50p 1.37%
Royal Dutch Shell 'A' (RDSA) 1,895.50p 1.34%
Randgold Resources Ltd. (RRS) 7,560.00p 1.27%
Royal Dutch Shell 'B' (RDSB) 1,977.00p 1.23%
Glencore (GLEN) 183.90p 1.18%
BP (BP.) 436.05p 1.17%
Rio Tinto (RIO) 2,354.00p 1.16%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 198.40p -2.89%
Provident Financial (PFG) 3,027.00p -2.35%
Lloyds Banking Group (LLOY) 59.54p -2.31%
Imperial Brands (IMB) 4,045.50p -2.05%
British American Tobacco (BATS) 4,794.50p -1.47%
Coca-Cola HBC AG (CDI) (CCH) 1,671.00p -1.42%
Intu Properties (INTU) 308.00p -1.41%
Tesco (TSCO) 169.25p -1.40%
Standard Life (SL.) 368.90p -1.21%
Worldpay Group (WI) (WPG) 294.90p -1.11%

FTSE 250 - Risers

Zoopla Property Group (WI) (ZPLA) 330.30p 7.94%
Dechra Pharmaceuticals (DPH) 1,352.00p 4.00%
DFS Furniture (DFS) 284.10p 3.31%
Acacia Mining (ACA) 499.60p 3.22%
Evraz (EVR) 132.00p 3.21%
Carillion (CLLN) 268.10p 2.68%
Cairn Energy (CNE) 197.00p 2.55%
Allied Minds (ALM) 338.50p 2.54%
Vedanta Resources (VED) 511.50p 2.44%
Hochschild Mining (HOC) 267.80p 2.37%

FTSE 250 - Fallers

Ibstock (IBST) 168.20p -3.05%
Virgin Money Holdings (UK) (VM.) 307.90p -3.05%
Redefine International (RDI) 42.32p -2.80%
Hastings Group Holdings (HSTG) 220.80p -2.47%
Greencore Group (GNC) 359.30p -2.23%
Tritax Big Box Reit (BBOX) 144.90p -2.16%
Countrywide (CWD) 261.80p -2.06%
Mitchells & Butlers (MAB) 263.10p -1.97%
Workspace Group (WKP) 704.50p -1.88%
Cranswick (CWK) 2,309.00p -1.83%