London midday: Stocks hold onto gains after manufacturing data

London stocks were holding onto gains by midday on Thursday as the pound fell amid ongoing election jitters and despite a better-than-expected reading on the UK manufacturing sector.

The FTSE 100 was up 0.4% to 7,549.66, while the pound was down 0.2% against the dollar at 1.2851, still in the doldrums as the latest YouGov poll for The Times published overnight showed the Tory lead over Labour has narrowed to just three points. The latest poll came hot on the heels of a projection by the pollster that suggested the Conservatives could lose as many as 20 seats, while Labour could gain 28, leading to a hung Parliament.

"The pound has once again fallen victim to the uncertainty surrounding the election outcome next week," said Oanda analyst Craig Erlam. "What once looked like being an easy campaign for Theresa May and a question of just how large the majority could get has been clouded by problems, which doesn’t bode well for the Brexit negotiations.

"Whether May can stage a recovery over the next week and settle traders nerves is yet to be seen but in the absence of this – and momentum is very much against her – sterling continues to look vulnerable. On the bright side, this is good news for the FTSE which has tended to benefit from the weaker currency due to the global nature of the companies that make it up."

With investors firmly focused on the upcoming election, stronger-than-expected manufacturing data for May wasn't enough to lift sterling out of its slump. The manufacturing purchasing managers' index from IHS Markit/CIPS slipped to 56.7 from the three-year high of 57.3 in April, but was above the consensus estimate of 56.5.

With a PMI above 50 indicating growth, the sector seemed to have remained resilient in May, Markit said, with production and new orders both expanding at above-average rates, with good domestic demand and a solid increase in new export business.

Some economists suggested this was more to do with a global upturn than a benefit from sterling's ongoing weakness since the Brexit vote.

The output balance softened to 57.4 in May from 58.2 in April and export orders fell back to 53.5 from 55.6.

Employment rose for the tenth consecutive month, with the rate of jobs growth the fastest since June 2014.

Investors were also mulling over the latest survey from Nationwide, which showed UK house prices fell for the third month in a row in May, the first time this has happened since 2009.

On the corporate front, Rolls-Royce rose after saying it has won an order to supply low-emissions gas engines for Norwegian ferry operator, Torghatten Nord, while Inmarsat rocketed following a report that Japan's SoftBank was in talks with the satellite communications services provider about a possible tie-up.

Auto Trader pushed higher as Barclays upgraded the stock to 'overweight' from 'equalweight', while 3i was boosted as it upped its target price on the stock to 980p from 750p.

On the downside, chemicals group Johnson Matthey was in the red after it posted a 12% jump in full-year revenue, with analysts pointing to disappointment that no special dividend was announced, while Mediclinic was hit by a downgrade at Credit Suisse.

Passenger transport operator FirstGroup tanked after it reported a rise in revenue and profit for the year to the end of March, but highlighted continued economic uncertainty in the UK, with analysts highlighting disappointment over the absence of a dividend.

Polymetal was on the back foot as it increased its stake in the Dolinnoye gold property, acquiring another 25% interest for $1.6m, while Marks & Spencer, Shire and Taylor Wimpey retreated as their stock went ex-dividend.

Barclays gave up earlier gains to nudge lower as it increased the size of the sale of its stake in Barclays Africa Group due to "strong investor demand".

Market Movers

FTSE 100 (UKX) 7,549.66 0.40%
FTSE 250 (MCX) 19,997.67 0.13%
techMARK (TASX) 3,646.30 0.59%

FTSE 100 - Risers

Convatec Group (CTEC) 330.50p 3.16%
Paddy Power Betfair (PPB) 8,310.00p 2.97%
3i Group (III) 916.00p 2.35%
Micro Focus International (MCRO) 2,449.00p 2.30%
Coca-Cola HBC AG (CDI) (CCH) 2,295.00p 1.86%
AstraZeneca (AZN) 5,321.00p 1.66%
Diageo (DGE) 2,365.50p 1.61%
Rolls-Royce Holdings (RR.) 881.50p 1.56%
DCC (DCC) 7,480.00p 1.42%
International Consolidated Airlines Group SA (CDI) (IAG) 612.50p 1.41%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 193.40p -4.92%
Mediclinic International (MDC) 779.50p -3.59%
National Grid (NG.) 1,057.50p -2.98%
Marks & Spencer Group (MKS) 373.20p -2.27%
Anglo American (AAL) 1,018.00p -1.36%
Tesco (TSCO) 181.95p -1.14%
Royal Bank of Scotland Group (RBS) 257.30p -1.04%
ITV (ITV) 194.00p -0.87%
Shire Plc (SHP) 4,433.00p -0.82%
Glencore (GLEN) 283.25p -0.72%

FTSE 250 - Risers

Auto Trader Group (AUTO) 437.00p 5.05%
Inmarsat (ISAT) 838.00p 4.75%
Brewin Dolphin Holdings (BRW) 351.80p 3.87%
IWG (IWG) 344.30p 3.61%
Ferrexpo (FXPO) 177.30p 3.26%
Caledonia Investments (CLDN) 2,974.00p 3.23%
Sophos Group (SOPH) 464.30p 2.63%
Britvic (BVIC) 715.00p 2.14%
Howden Joinery Group (HWDN) 460.00p 1.55%
Spectris (SXS) 2,652.00p 1.49%

FTSE 250 - Fallers

FirstGroup (FGP) 141.00p -5.87%
Nostrum Oil & Gas (NOG) 510.50p -3.95%
CLS Holdings (CLI) 193.00p -3.45%
Aldermore Group (ALD) 235.70p -3.24%
Petra Diamonds Ltd.(DI) (PDL) 125.50p -3.24%
Allied Minds (ALM) 145.60p -2.43%
Clarkson (CKN) 2,618.00p -2.31%
Debenhams (DEB) 49.00p -2.20%
Dechra Pharmaceuticals (DPH) 1,904.00p -2.06%
Ted Baker (TED) 2,402.00p -2.00%