London midday: Stocks flat after services data

London stocks had pared earlier losses to trade flat by midday on Wednesday, as investors mulled the latest reading on the UK services sector and kept an eye on China-US tensions.

The FTSE 100 was steady at 7,406.29, while sterling was unchanged against the dollar at 1.2172 ahead of Thursday’s Bank of England rate announcement.

Russ Mould, investment director at AJ Bell, said: "Investors already have more than enough on their plate. Now they find themselves having to make room for one more worry, as tensions build between the US and China.

"After several trade spats during the Trump administration, things had largely calmed down under his successor. But Nancy Pelosi’s visit to Taiwan to see the president there has been met with stern warnings from Beijing.

"So far the response has been to hold military drills and step up sanctions on a country it regards as a breakaway province. However, a sell-off on Wall Street suggested there is concern about an escalation.

"Oil was flat ahead of an OPEC meeting where the cartel is widely expected to agree to either increase output slightly in September or maintain it. Crude has dropped sharply from its recent highs, with an economic slowdown expected to hit demand.

"Given OPEC has been struggling to hit production targets anyway, traders may treat whatever comes out of its latest summit with some scepticism."

Investors were also mulling the latest survey from S&P Global/CIPS, which showed that the services sector grew in July at the slowest pace since February 2021 as inflationary pressures dampened demand.

The services purchasing managers’ index fell to 52.6 in July from 54.3 in June, coming in below a preliminary estimate of 53.3. This was the weakest service sector performance since February 2021.

The composite PMI output index - which covers both the services and manufacturing sectors - fell to 52.1 from 53.7. This also marked the slowest rate of expansion since February last year and was below the flash estimate of 52.8.

Tim Moore, economics director at S&P Global Market Intelligence, said: "UK service providers reported their worst month for business activity expansion since the national lockdown in February 2021.

"Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand across the service economy. The near-term outlook also looks subdued, as new order growth held close to June's 16-month low and business optimism was the second-weakest since May 2020."

In equity markets, British Gas owner Centrica slumped after a downgrade to ‘neutral’ at Citi, while Kingfisher was knocked lower by a downgrade to ‘sell’ at Societe Generale.

Ascential was under the cosh after a downgrade to ‘hold’ from ‘buy’ at Berenberg.

Hiscox tumbled after the insurer said it swung to an interim loss despite a strong underwriting performance.

On the upside, Avast shares rocketed after the Competition and Markets Authority provisionally cleared its $8.6bn acquisition by NortonLifeLock.

House builder Taylor Wimpey gained after saying it expects full-year profits to be at the upper end of forecasts as it reported a rise in interim earnings, driven by strong selling prices.

Engine maker Rolls-Royce was also up as it said the Spanish government had approved the sale of its ITP Aero subsidiary to a consortium of investors led by Bain Capital Private Equity.

BAE Systems was boosted by an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan Cazenove, while Virgin Money was lifted by an upgrade to ‘outperform’ at Macquarie.

Market Movers

FTSE 100 (UKX) 7,406.29 -0.04%
FTSE 250 (MCX) 19,900.47 0.13%
techMARK (TASX) 4,325.92 -0.06%

FTSE 100 - Risers

Avast (AVST) 682.20p 42.75%
Taylor Wimpey (TW.) 125.10p 4.21%
Ocado Group (OCDO) 894.80p 2.90%
Rolls-Royce Holdings (RR.) 90.32p 2.87%
Entain (ENT) 1,237.00p 2.70%
Flutter Entertainment (CDI) (FLTR) 8,318.00p 2.46%
Pershing Square Holdings Ltd NPV (PSH) 2,720.00p 2.26%
Standard Chartered (STAN) 595.40p 2.13%
Aveva Group (AVV) 2,307.00p 2.12%
Persimmon (PSN) 1,859.50p 1.89%

FTSE 100 - Fallers

Fresnillo (FRES) 681.40p -4.35%
Centrica (CNA) 86.48p -2.98%
Croda International (CRDA) 7,224.00p -2.64%
Kingfisher (KGF) 243.90p -2.21%
Airtel Africa (AAF) 155.80p -2.20%
GSK (GSK) 1,658.40p -2.16%
AstraZeneca (AZN) 10,584.00p -1.82%
Sainsbury (J) (SBRY) 217.10p -1.63%
Severn Trent (SVT) 2,959.00p -1.33%
Ashtead Group (AHT) 4,479.00p -1.15%

FTSE 250 - Risers

888 Holdings (DI) (888) 147.50p 4.02%
Domino's Pizza Group (DOM) 281.40p 3.00%
Liontrust Asset Management (LIO) 1,030.00p 3.00%
ASOS (ASC) 1,032.00p 2.99%
Countryside Partnerships (CSP) 288.20p 2.93%
TUI AG Reg Shs (DI) (TUI) 135.75p 2.80%
Bellway (BWY) 2,349.00p 2.67%
Crest Nicholson Holdings (CRST) 273.60p 2.63%
Syncona Limited NPV (SYNC) 199.00p 2.58%
Coats Group (COA) 72.60p 2.54%

FTSE 250 - Fallers

Ascential (ASCL) 225.60p -6.16%
Hiscox Limited (DI) (HSX) 833.20p -4.86%
Man Group (EMG) 235.00p -4.74%
XP Power Ltd. (DI) (XPP) 2,310.00p -4.35%
Hill & Smith Holdings (HILS) 1,228.00p -3.31%
Synthomer (SYNT) 200.60p -3.19%
Telecom Plus (TEP) 2,190.00p -2.67%
Abrdn Private Equity Opportunities Trust (APEO) 469.00p -2.29%
Drax Group (DRX) 765.50p -2.23%
Pennon Group (PNN) 1,007.00p -2.14%