London midday: Stocks maintain gains as investors eye resumption of trade talks

London stocks were still in the green by midday on Friday as data showed that UK economic growth picked up in the first quarter, while investors continued to hope for a trade deal between the US and China even as the US lifted tariffs on Chinese goods.

China has vowed to retaliate after the US lifted tariffs on $200bn of Chinese goods to 25% from 10%. China said it "deeply regrets" the move and will have to take "necessary counter-measures."

However, it seemed investors were erring on the side of optimism and hoping that a deal can still be struck, as talks between Chinese Vice Premier Liu He and US trade representatives were due to resume later in the day.

The FTSE 100 was up 0.5% at 7,243.36, while the pound was 0.1% firmer against the dollar at 1.3020 and flat versus the euro at 1.1593.

Spreadex analyst Connor Campbell said: "A couple of things seem to have prevented another selloff. That these tariffs don’t apply to goods currently on their way to the US has been read as creating a grace period that could potentially see a deal emerge.

"Ditto the fact that talks will continue in Washington this Friday and that China is yet to outline the form of its retaliation (admittedly the country hasn’t had a lot of time to do so). "

On home shores, investors digested data from the Office for National Statistics showing that the UK economy grew 0.5% in the first quarter, as expected, and up from 0.2% growth in the final quarter of last year.

On the first quarter of 2018, GDP was up 1.8% compared to 1.4% growth in the last three months of 2018, also in line with economists’ expectations.

Figures from the ONS showed that solid growth in factory output drove a stronger-than-expected increase in production in the first quarter of the year.

Manufacturing output rose 2.2% in the three months to March sending total production 1.4% higher - the strongest rise over three months since February 2017.

Monthly total production rose for the third straight period, gaining 0.7% in March, ahead of the 0.6% rise in February and expectations for 0.1% growth.

Manufacturing was the biggest contributor, rising 0.9% with strong showings by pharmaceuticals, transport equipment and other manufacturing and repair. On average, economists had expected a rise of just 0.2%.

Tej Parikh, senior economist at the Institute of Directors, said the relatively strong growth figures for Q1 "may just be a flash in the pan".

"Some businesses brought activity forward early this year in preparation for leaving the EU, so higher stocks and earlier orders have artificially bumped up the growth numbers," he said.

"In Q2 many firms will be keen to run down their Brexit caches, which will drag on economic growth. Keen consumers also played a key role in lifting sales in the first quarter, but barring temporary boosts due to weather, households will overall remain cautious in the months ahead."

In corporate news, British Airways and Iberia parent International Consolidated Airlines flew higher even as it said that profit more than halved in the first quarter as it was buffeted by rising fuel costs and stiff competition.

George Salmon, equity analyst at Hargreaves Lansdown, said: "It’s not every day you’ll see a company’s profits fall so sharply but the shares still rise. But when your competitors have slipped into a loss, it’s perhaps not a surprise.

"The main factor holding back profits is increased fuel prices, which have been compounded by a rise in the US dollar. The group is confident it can offset these macro headwinds with cost efficiencies elsewhere, such that profits come in level with last year. That would be an impressive achievement in the current climate."

Aviation support company BBA Aviation rose as it said trading remained in line with expectations, with revenue for the first four months of 2019 up 23.1% year-on year.

Millennium & Copthorne was higher despite posting a drop in first-quarter revenue and pre-tax profit as it took a hit from the refurbishment of some of its hotels.

On the downside, wealth manager Brewin Dolphin retreated as it confirmed that it has agreed to buy the Irish wealth management business of Investec for around €44m and announced a placing to raise approximately £60m to "maintain a strong regulatory capital level".

Anti-virus software developer Avast lost ground after shares of US peer Symantec slumped in after-hours trading as its quarterly earnings missed expectations and the company's revenue guidance fell short.

British Land was hit by downgrades at Barclays and Kempen, while Auto Trader was knocked lower by a downgrade to ‘neutral’ at Citi.

Market Movers

FTSE 100 (UKX) 7,243.36 0.50%
FTSE 250 (MCX) 19,455.08 0.88%
techMARK (TASX) 3,543.23 0.24%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 506.00p 3.41%
Ferguson (FERG) 5,516.00p 2.91%
RSA Insurance Group (RSA) 559.80p 2.45%
Burberry Group (BRBY) 1,942.00p 2.24%
Ashtead Group (AHT) 2,049.00p 2.19%
Evraz (EVR) 596.20p 2.19%
Smith (DS) (SMDS) 342.70p 2.12%
Morrison (Wm) Supermarkets (MRW) 215.87p 1.97%
Mondi (MNDI) 1,668.65p 1.87%
St James's Place (STJ) 1,117.00p 1.87%

FTSE 100 - Fallers

British Land Company (BLND) 565.60p -3.15%
Bunzl (BNZL) 2,150.00p -1.83%
British American Tobacco (BATS) 2,840.00p -1.58%
AstraZeneca (AZN) 5,743.00p -1.42%
Land Securities Group (LAND) 900.22p -1.38%
Ocado Group (OCDO) 1,320.00p -0.90%
Auto Trader Group (AUTO) 575.40p -0.86%
Imperial Brands (IMB) 2,209.00p -0.83%
Reckitt Benckiser Group (RB.) 6,115.00p -0.65%
GlaxoSmithKline (GSK) 1,509.80p -0.55%

FTSE 250 - Risers

Ted Baker (TED) 1,584.24p 5.55%
Funding Circle Holdings (FCH) 246.50p 4.45%
Premier Oil (PMO) 88.73p 3.56%
Just Group (JUST) 65.95p 3.45%
Tate & Lyle (TATE) 782.40p 3.44%
Sirius Minerals (SXX) 18.20p 3.12%
Games Workshop Group (GAW) 4,134.00p 2.89%
Playtech (PTEC) 400.90p 2.82%
Vivo Energy (VVO) 127.75p 2.69%
FirstGroup (FGP) 117.96p 2.58%

FTSE 250 - Fallers

Brewin Dolphin Holdings (BRW) 307.13p -4.32%
Avast (AVST) 306.82p -2.10%
Babcock International Group (BAB) 510.40p -1.39%
Beazley (BEZ) 533.50p -0.93%
Go-Ahead Group (GOG) 1,911.00p -0.83%
Telecom Plus (TEP) 1,454.00p -0.82%
NewRiver REIT (NRR) 231.84p -0.71%
Hochschild Mining (HOC) 171.60p -0.69%
Pantheon International (PIN) 2,154.95p -0.69%
Clarkson (CKN) 2,350.00p -0.63%