London midday: Stocks gain as pound weakens on Brexit news

London stocks gained on Monday as the pound weakened after Prime Minister Theresa May said the UK will begin the formal Brexit negotiation process by the end of March 2017.

The pound fell 0.76% against the dollar to $1.2874 and dropped 0.74% versus the euro to €1.1457 at 1130 BST after May revealed the timing of triggering Article 50 of the Lisbon Treaty, which means the UK will leave the EU by summer 2019.

May told the Tory Party conference the government would make a deal with the EU as an “independent, sovereign” UK.

“May’s announcement suggested that the UK may be leaning toward a so-called ‘hard Brexit’, which could take away the flexibility that the markets would need to digest the post-Brexit changes, could abbreviate the time that businesses would need to adopt to the new configuration, hence could compromise a smooth collaboration through the sore procedure of divorce between the UK and the EU markets,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

Meanwhile, a weaker pound appeared to help to support the UK manufacturing industry in September. Markit’s purchasing managers’ index rose to 55.4 last month from 53.4 in August, beating expectations for a reading of 52.1. A reading above 50 signals expansion in sector activity, while a level below that indicates a contraction.

“While domestic orders were a significant driver of the result, the manufacturing sector appears to be benefiting from the fall in the pound that occurred both before and after the EU referendum,” said Scott Bowman, UK economist at Capital Economics.

In other UK news, the Bank of England will subject Barclays, HSBC,Lloyds, Nationwide, Royal Bank of Scotland, Santander and Standard Chartered to a two-part stress test in 2017.

The BoE, which is still analysing the results of the 2016 stress tests before scheduled feedback to the banks next month, suggested a year ago that next year's stress tests of the major UK banks will for the first time include a second scenario.

In the eurozone, Markit’s final manufacturing PMI came in at 52.6 in September, in line with the flash estimate and up from 51.7 the month before.

Still to come, Markit releases its US manufacturing PMI at 1445 BST while ISM publishes its manufacturing index at 1500 BST.

Among corporate stocks, housebuilders rallied on news Chancellor Philip Hammond will reveal a £3bn rejigged housing scheme in his speech to the Conservative party conference.

Henderson Group surged after agreeing a $6bn merger with US fund management peer Janus Capital.

AstraZeneca advanced as it global biologics research and development arm MedImmune entered into a licensing agreement with Allergan for the global rights to MEDI2070, which is currently in a Phase IIb clinical trial for moderate-to-severe Crohn's disease and ready for Phase II for ulcerative colitis.

Assura slumped as the healthcare property investor appointed finance director Jonathan Murphy as interim chief executive after a half-year in which it acquired more than 40 medical centres and strengthened its balance sheet.

Market Movers

FTSE 100 (UKX) 6,978.16 1.14%
FTSE 250 (MCX) 18,090.36 1.23%
techMARK (TASX) 3,531.50 1.30%

FTSE 100 - Risers

Travis Perkins (TPK) 1,590.00p 2.98%
Royal Dutch Shell 'A' (RDSA) 1,965.50p 2.69%
Royal Dutch Shell 'B' (RDSB) 2,050.50p 2.68%
Anglo American (AAL) 993.10p 2.64%
InterContinental Hotels Group (IHG) 3,260.00p 2.52%
Babcock International Group (BAB) 1,059.00p 2.32%
Bunzl (BNZL) 2,330.00p 2.19%
Schroders (SDR) 2,752.00p 2.08%
Smiths Group (SMIN) 1,494.00p 2.05%
Provident Financial (PFG) 3,094.00p 2.01%

FTSE 100 - Fallers

BT Group (BT.A) 384.00p -1.30%
Next (NXT) 4,725.00p -1.07%
Capita (CPI) 663.50p -0.97%
Marks & Spencer Group (MKS) 328.00p -0.94%
ITV (ITV) 185.50p -0.91%
British Land Company (BLND) 627.00p -0.87%
Royal Bank of Scotland Group (RBS) 177.50p -0.73%
Severn Trent (SVT) 2,488.00p -0.68%
Barclays (BARC) 166.75p -0.63%
Legal & General Group (LGEN) 217.40p -0.59%

FTSE 250 - Risers

Henderson Group (HGG) 261.90p 12.89%
Ibstock (IBST) 170.00p 5.26%
Jupiter Fund Management (JUP) 445.90p 4.82%
NCC Group (NCC) 367.20p 4.73%
Evraz (EVR) 168.40p 4.60%
JRP Group (JRP) 140.00p 4.48%
Hunting (HTG) 478.50p 4.38%
Aberdeen Asset Management (ADN) 340.50p 4.35%
Virgin Money Holdings (UK) (VM.) 324.30p 4.21%
Sports Direct International (SPD) 298.60p 3.93%

FTSE 250 - Fallers

Ocado Group (OCDO) 255.80p -3.29%
Euromoney Institutional Investor (ERM) 1,080.00p -2.61%
Softcat (SCT) 315.10p -1.53%
Debenhams (DEB) 55.15p -1.08%
Barr (A.G.) (BAG) 508.00p -0.97%
Great Portland Estates (GPOR) 627.00p -0.95%
Brown (N.) Group (BWNG) 188.20p -0.90%
Ted Baker (TED) 2,444.00p -0.81%
Allied Minds (ALM) 324.60p -0.64%
Stagecoach Group (SGC) 210.10p -0.57%