London midday: Stocks maintain gains as pound hit by political turmoil

London stocks were still firmly in the black by midday on Wednesday following a heavy selloff in the previous session, with a weaker pound lending a hand amid political turmoil.

The FTSE 100 was up 1.8% at 7,152.81, having closed down 2.9% on Tuesday amid renewed concerns about inflation and a global slowdown.

Prime Minister Boris Johnson’s future was hanging in the balance following a string of resignations by Tory MPs, which was kicked off on Tuesday evening by Chancellor Rishi Sunak and Health Secretary Sajid Javid.

Having tumbled to a two-year low against the dollar in the aftermath of the initial resignations, sterling was down 0.2% at 1.1926.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "The FTSE 100 has risen in early trade after yesterday’s sell off, partly helped by the weaker pound given that it helps multinationals earning in dollars, but the mood is likely to be cautious as worries persist about the impact of weakening consumer and business confidence.

"Turmoil in Westminster is adding another layer to the uncertainty hanging over the prospects for the UK economy amid a darkening global outlook. The pound has plummeted to levels not seen since March 2020 in the early days of the pandemic.

"However, the flight to the dollar accounts for much of the slide in sterling we’ve seen over the last 24 hours as investors take fright about the worries about recessions hitting.

"The door of number 10 Downing Street is almost a distraction, and much of the focus will continue to be on the knock-on effects of the global slowdown, and the impact on the UK economy, given its fragility.

"Worries about a big global slowdown are still gripping financial markets and that nervousness is unlikely to dissipate any time soon."

On the macroeconomic front, a survey released earlier showed that growth in the UK construction sector slowed in June to its weakest rate since September last year, with housing activity down for the first time in more than two years amid worries about the economic outlook.

The S&P Global/CIPS construction purchasing managers’ index fell to 52.6 from 56.4 in May, coming in below analysts’ expectations for a reading of 55.0. A level above 50.0 signals expansion, while a reading below indicates contraction.

Housebuilding was the weakest area of construction activity for the fourth month in a row, with the index for the sub-sector printing below 50.0 at 49.3. Meanwhile, civil engineering was the most resilient sub-sector.

New orders increased to the smallest extent since October 2021 and the survey found that concerns about the near-term economic outlook led to a sharp decline in business expectations for the year ahead.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: "The gloomy UK business outlook and worsening consumer demand due to the cost of living crisis combined to put the brakes on construction growth in June. Commercial construction saw a considerable loss of momentum as clients exercised greater caution on new spending, while long-term infrastructure projects ensured a relatively resilient trend for civil engineering activity.

"House building has expanded more quickly than the rest of the construction sector over the course of the pandemic, but now finds itself as the worst-performing broad category so far in 2022. Moreover, the latest survey indicated an outright decline in residential work for the first time in just over two years."

In equity markets, Abrdn jumped to the top of the FTSE 100 after it announced the launch of a £300m share buyback programme.

Intermediate Capital rallied after The Times reported that the fund manager was in exclusive talks to buy Wembley Arena.

Online rail ticketing platform Trainline surged as it lifted annual guidance after a bigger-than-expected surge in demand for travel, particularly from US visitors.

Industrial thread maker Coats rallied after announcing the acquisition of Texon International Group, a footwear solutions provider, for an enterprise value of $237m.

Discoverie also gained after saying it had bought CDT, a designer and manufacturer of customised plastic enclosures for circuit boards, membrane keypads and associated electronics components, for £5m.

Market Movers

FTSE 100 (UKX) 7,152.81 1.81%
FTSE 250 (MCX) 18,600.15 1.56%
techMARK (TASX) 4,332.32 1.59%

FTSE 100 - Risers

Abrdn (ABDN) 161.25p 8.26%
Scottish Mortgage Inv Trust (SMT) 766.00p 5.48%
Intermediate Capital Group (ICP) 1,350.00p 5.10%
Hargreaves Lansdown (HL.) 799.20p 4.72%
Rolls-Royce Holdings (RR.) 82.57p 4.36%
Aveva Group (AVV) 2,399.00p 4.17%
Informa (INF) 535.20p 4.04%
Auto Trader Group (AUTO) 585.60p 3.98%
St James's Place (STJ) 1,095.00p 3.89%
JD Sports Fashion (JD.) 117.50p 3.84%

FTSE 100 - Fallers

Fresnillo (FRES) 706.40p -2.81%
Standard Chartered (STAN) 577.20p -2.50%
Harbour Energy (HBR) 309.70p -2.06%
Croda International (CRDA) 6,668.00p -1.65%
Centrica (CNA) 74.98p -1.34%
HSBC Holdings (HSBA) 520.50p -0.50%
Avast (AVST) 511.20p -0.35%
Meggitt (MGGT) 786.20p -0.33%
Legal & General Group (LGEN) 233.70p 0.04%
GSK (GSK) 1,791.20p 0.26%

FTSE 250 - Risers

Trainline (TRN) 343.80p 21.96%
Carnival (CCL) 692.80p 6.95%
Discoverie Group (DSCV) 667.00p 6.21%
4Imprint Group (FOUR) 2,425.00p 5.66%
Ascential (ASCL) 285.80p 5.23%
Network International Holdings (NETW) 196.00p 4.87%
IP Group (IPO) 69.80p 4.73%
Liontrust Asset Management (LIO) 903.00p 4.63%
Wetherspoon (J.D.) (JDW) 630.50p 4.13%
Chrysalis Investments Limited NPV (CHRY) 93.60p 4.00%

FTSE 250 - Fallers

Polymetal International (POLY) 178.00p -2.20%
FirstGroup (FGP) 122.50p -1.84%
Centamin (DI) (CEY) 76.84p -1.66%
Morgan Advanced Materials (MGAM) 259.00p -1.33%
Hochschild Mining (HOC) 82.00p -1.20%
Vietnam Enterprise Investments (DI) (VEIL) 651.00p -0.91%
Diversified Energy Company (DEC) 109.70p -0.81%
Mediclinic International (MDC) 442.40p -0.81%
Drax Group (DRX) 632.00p -0.78%
BH Macro Ltd. GBP Shares (BHMG) 4,270.00p -0.70%