London midday: Stocks pare gains after services data
London stocks had pared gains by midday on Wednesday to trade just a touch higher, as investors weighed up uninspiring services data against optimism over the vaccine rollout and US stimulus.
The FTSE 100 was up 0.2% at 6,527.52.
Spreadex analyst Connor Campbell noted multiple positive headlines related to vaccines.
"A study has shown that one dose of the Oxford/AstraZeneca preparation provides protection against Covid for at least 3 months, while cutting transmission by 67%,” he said. At the same time a partnership has been announced between AstraZeneca’s FTSE 100 rival GlaxoSmithKline and CureVac, to develop the new generation of vaccines to tackle covid-19 variants."
On the US stimulus front, meanwhile, the Senate voted 50 to 49 to begin the process of budget reconciliation, meaning the Democrats can push through the package without needing to bring 10 Republicans over to their side of the table.
"It’s the best option for the markets, as it should preserve the scale of the $1.9 trillion plan," said Campbell.
However, sentiment took a knock after the latest survey on UK services showed the sector suffered the sharpest decline in business activity in January in eight months, although the rollout of Covid vaccines helped to lift optimism to its highest since May 2014.
The IHS Markit/CIPS purchasing managers’ index for the sector fell to 39.5 from 49.4 in December, as the third national lockdown took its toll, weighing on the travel, leisure and hospitality businesses. Still, the index came in above the consensus and flash estimate of 38.8.
Survey respondents also pointed to cautious spending patterns among clients and renewed delays to projects due to the pandemic.
On the upside, however, around 60% of survey respondents said they expect a rise in business activity over the next 12 months, compared to just 13% predicting a decline. This was attributed in part to "swift progress" in the UK vaccine rollout, providing hope of a timely return to growth and the release of pent up demand in 2021.
Tim Moore, economics director at IHS Markit, said: "Service providers experienced a steep downturn in business activity due to the third national lockdown in January, although the speed of decline remains much slower than last spring. Tight restrictions on travel, leisure and hospitality resulted in severely reduced trading among customer-facing businesses.
"Temporary closures led to shrinking demand for business services and a ripple effect of corporate spending cutbacks. As a result, total new work fell at the fastest pace since May 2020 and this setback contributed to a steeper rate of job shedding at the start of the year."
In equity markets, Vodafone rallied as it said it was confident about the full-year outlook after its German business drove a return to organic growth in the third quarter.
Aviva advanced after an upgrade to ‘overweight’ at Morgan Stanley, while Upper Crust owner SSP was boosted by an upgrade to ‘buy’ at Berenberg.
Elsewhere, housebuilders Persimmon and Taylor Wimpey were lifted by upgrades to ‘overweight’ at Barclays, while Redrow was higher on the back of a positive note from JPMorgan.
Wizz Air flew higher even as it said January passenger numbers plunged 81.8% year-on-year as new variants of the coronavirus and travel bans battered demand.
GlaxoSmithKline ticked up after it and CureVac announced a new €150m collaboration to develop a vaccine to combat emerging variants of Covid-19.
On the downside, Unite Group fell after it announced a three-week extension to its 50% student discount and said the move would cost it £6m in lost revenue. It was also hit by a downgrade to ‘underweight’ at Barclays.
Market Movers
FTSE 100 (UKX) 6,527.52 0.17%
FTSE 250 (MCX) 20,771.90 0.39%
techMARK (TASX) 4,135.81 0.56%
FTSE 100 - Risers
Vodafone Group (VOD) 133.00p 4.41%
Aviva (AV.) 357.70p 3.89%
Persimmon (PSN) 2,728.00p 2.59%
Ocado Group (OCDO) 2,863.00p 2.25%
M&G (MNG) 186.80p 2.19%
Taylor Wimpey (TW.) 157.60p 1.97%
Pennon Group (PNN) 971.40p 1.74%
Whitbread (WTB) 3,062.00p 1.53%
Severn Trent (SVT) 2,393.00p 1.31%
United Utilities Group (UU.) 949.40p 1.26%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 91.42p -3.52%
Fresnillo (FRES) 1,001.50p -2.20%
Evraz (EVR) 492.80p -1.99%
Royal Dutch Shell 'A' (RDSA) 1,295.20p -1.64%
Royal Dutch Shell 'B' (RDSB) 1,233.00p -1.38%
HSBC Holdings (HSBA) 387.05p -1.12%
Polymetal International (POLY) 1,642.50p -1.11%
Standard Chartered (STAN) 445.30p -0.96%
Diageo (DGE) 3,016.50p -0.90%
BAE Systems (BA.) 471.90p -0.88%
FTSE 250 - Risers
SSP Group (SSPG) 327.40p 6.99%
Virgin Money UK (VMUK) 151.65p 6.80%
Wizz Air Holdings (WIZZ) 4,806.00p 4.12%
Redrow (RDW) 557.00p 4.11%
FirstGroup (FGP) 76.65p 3.65%
Capita (CPI) 38.07p 3.59%
Wetherspoon (J.D.) (JDW) 1,252.00p 2.71%
Plus500 Ltd (DI) (PLUS) 1,439.50p 2.67%
St. Modwen Properties (SMP) 399.00p 2.57%
Savills (SVS) 1,094.00p 2.43%
FTSE 250 - Fallers
Aston Martin Lagonda Global Holdings (AML) 2,150.00p -5.41%
Unite Group (UTG) 946.00p -3.91%
Hochschild Mining (HOC) 222.00p -2.55%
Petrofac Ltd. (PFC) 113.75p -2.44%
Babcock International Group (BAB) 231.50p -2.40%
Sirius Real Estate Ltd. (SRE) 91.40p -2.25%
TBC Bank Group (TBCG) 1,254.00p -2.03%
Morgan Sindall Group (MGNS) 1,470.00p -2.00%
Petropavlovsk (POG) 28.30p -1.74%
Oxford Biomedica (OXB) 989.00p -1.49%