London midday: Stocks gain after better-than-expected UK construction data

London stocks gained on Friday as investors digested better-than-forecast UK construction data and awaited the all-important US non-farm payrolls report.

The Markit/CIPS UK construction purchasing managers’ index rose to 49.2 from July’s 85-month low of 45.9, beating economists’ expectations for a reading of 46.1.

The latest reading signalled the slowest past of decline since the downturn began in June, but the index remained below the 50.0 mark that separates contraction from expansion.

Tim Moore, senior economist at Markit, said: “The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building. Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.

“However, the latest survey indicates only a partial move towards stabilisation, rather than a return to business as usual across the construction sector. There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects.”

The attention now turns to the non-farm payrolls report at 1330 BST, which will be closely scrutinised after Federal Reserve chair Janet Yellen said the next interest rate hike will depend on the performance of incoming data. Speaking at the Jackson Hole conference last Friday, she said the case for an interest rate has strengthened in light of improving labour market conditions and economic outlook.

Craig Erlam, senior market analyst at Oanda, said: “The US jobs report is always a major economic release for the economy but this one carries additional weight following comments at Jackson Hole last week from a number of Fed officials who suggested were on the cusp of the next rate hike. Stanley Fischer, vice Chair, referred to the report directly a week ago when he claimed it will ‘weigh in our decision’.

“Ultimately, regardless of this one report I think the Fed is determined to continue the tightening process this year, barring another destabilising event, the question is whether that will be September or December. The problem the Fed has faced is one of damaged credibility which has prevented markets accurately pricing this in but I think a third stellar report on the bounce would help overcome this.”

Among corporate stocks, pharmaceutical shares led the charge with Hikma Pharmaceuticals, Smith & Nephew and GlaxoSmithKline in the black. Utilities joined the rally, including National Grid and United Utilities Group.

"They're good defensive, good dividend payers ... people are positioning themselves into less volatile stocks just ahead of what could be a pretty volatile month in the markets," said Augustin Eden, research analyst at Accendo Markets.

Going the other way, housebuilders reversed the previous day’s gains, dragged down by an ill-received full year trading update from FTSE 250-listed retirement home builder McCarthy & Stone.

Shares in McCarthy & Stone dropped after it reported a rise in revenue in the year to the end of August but said there has been evidence of some weakness in the secondary housing market since its update at the end of June.

“Whilst it is too early to judge what medium term impact we will see from the EU referendum result and the Bank of England's subsequent changes to monetary policy, prolonged housing market weakness, particularly in the secondary market, could affect our ability to deliver our targeted 15% volume growth previously indicated for the financial year ending 31 August 2017,” the company said in its trading update.

Fellow housebuilders Persimmon, Taylor Wimpey, Berkeley Group and Barratt Developments slumped.

Carnival was under pressure after Morgan Stanley downgraded the cruise operator to ‘underweight’.

Go-Ahead Group advanced after the passenger transport operator reported full year results that beat management expectations.

Market Movers

FTSE 100 (UKX) 6,818.66 1.08%
FTSE 250 (MCX) 17,895.83 0.26%
techMARK (TASX) 3,449.22 0.86%

FTSE 100 - Risers

Imperial Brands (IMB) 4,085.00p 3.09%
Hikma Pharmaceuticals (HIK) 2,137.00p 2.84%
Unilever (ULVR) 3,613.50p 2.44%
British American Tobacco (BATS) 4,822.00p 2.30%
National Grid (NG.) 1,064.00p 2.26%
GlaxoSmithKline (GSK) 1,633.00p 2.09%
Smith & Nephew (SN.) 1,236.00p 2.06%
Rolls-Royce Holdings (RR.) 775.00p 1.97%
Centrica (CNA) 233.40p 1.92%
United Utilities Group (UU.) 986.50p 1.91%

FTSE 100 - Fallers

Carnival (CCL) 3,519.00p -4.01%
Persimmon (PSN) 1,831.00p -2.09%
Taylor Wimpey (TW.) 162.40p -1.93%
Berkeley Group Holdings (The) (BKG) 2,726.00p -1.77%
Barratt Developments (BDEV) 492.80p -1.44%
Intu Properties (INTU) 310.60p -1.37%
Worldpay Group (WI) (WPG) 292.00p -1.28%
Ashtead Group (AHT) 1,254.00p -1.10%
Travis Perkins (TPK) 1,647.00p -1.02%
British Land Company (BLND) 667.00p -0.97%

FTSE 250 - Risers

Go-Ahead Group (GOG) 2,169.00p 8.56%
Amec Foster Wheeler (AMFW) 567.00p 4.13%
Acacia Mining (ACA) 480.10p 3.74%
Indivior (INDV) 325.20p 2.55%
NMC Health (NMC) 1,392.00p 2.43%
Sports Direct International (SPD) 322.90p 2.31%
Ashmore Group (ASHM) 359.50p 2.16%
National Express Group (NEX) 359.60p 2.01%
Tullett Prebon (TLPR) 380.70p 1.85%
Pennon Group (PNN) 892.50p 1.83%

FTSE 250 - Fallers

McCarthy & Stone (MCS) 187.60p -10.45%
Ibstock (IBST) 168.20p -9.67%
SIG (SHI) 122.70p -3.46%
Intermediate Capital Group (ICP) 590.00p -3.12%
Countrywide (CWD) 261.10p -2.79%
Debenhams (DEB) 60.30p -2.66%
Aldermore Group (ALD) 160.80p -2.49%
Crest Nicholson Holdings (CRST) 471.30p -2.22%
Galliford Try (GFRD) 1,130.00p -2.16%
Shawbrook Group (SHAW) 228.60p -2.14%