London midday: Stocks pare gains; manufacturing data in focus

London stocks had pared earlier gains to trade flat by midday on Tuesday, with the Christmas lull well and truly upon us, as investors digested the latest reading on the UK manufacturing sector and a policy announcement from the Bank of Japan.

The FTSE 100 was steady at 7,612.59.

Russ Mould, investment director at AJ Bell, said "it feels like the party which started last Wednesday when the Federal Reserve signalled potential rate cuts in 2024 has fizzled out - as the central bank has looked to put a lid on market hopes for an easing in monetary policy".

He continued: "Tomorrow’s UK CPI reading should set the tone for rate expectations in the UK going into next year - anything below the forecast 4.3% could be supportive to UK stocks but a number above that level could trip them up as we head for the end of the year.

"Events in the Red Sea, where companies like Maersk and BP are diverting vessels thanks to a series of attacks, are a reminder of the impact of the ongoing conflict in the Middle East and may well act as a renewed inflationary pressure - as a disrupted supply chain leads to a higher cost of goods."

The BoJ announced earlier that it was keeping short-term interest rates at -0.1% as it continues to encourage banks to lend more and kickstart an economic recovery, but said it was keeping a close eye on price and wage movements before it considers tightening monetary policy.

Policymakers voted unanimously to keep rates unchanged, as widely expected, and said they would continue to purchase government bonds without setting an upper limit so that 10-year bond yields remains around 0% with an upper bound of 1.0%.

On home shores, the latest survey from the Confederation of British Industry showed that output in the manufacturing sector stabilised in December, but orders remained subdued.

The CBI’s monthly order book balance rose to -23 from -35 in November. This was above consensus expectations for a reading of -29 but still considered "below normal".

A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.

CBI deputy chief economist Anna Leach said: "UK manufacturers appear to have ended the year on a stable footing. with December’s results only the second set this year to not show falling activity. Selling price expectations are the weakest they have been in two years, reflecting ongoing improvements in supply conditions and soft demand.

"The environment for UK manufacturing is likely to remain challenging, with global growth set to remain weak in the year ahead. High interest rates will continue to weigh on household spending, while adding to business costs. And sticky domestic inflation and strong wage growth suggest cuts to UK interest rates are still some way off."

On the UK corporate front, news was scarce but Flutter Entertainment was boosted by an upgrade to ‘buy’ at Peel Hunt.

Music rights investor Hipgnosis Songs Fund fell as it delayed publication of its interim results. The results were due on Tuesday but have been pushed back to the end of December after the board expressed concerns about the value of the company's assets.

Hipgnosis said an independent valuation was "materially higher than the valuation implied by proposed and recent transactions in the sector".

Clothing retailer Superdry tumbled as it issued a profit warning, saying it was hit by a challenging trading environment and warm weather.

Market Movers

FTSE 100 (UKX) 7,612.59 -0.02%
FTSE 250 (MCX) 19,321.31 0.52%
techMARK (TASX) 4,220.53 0.59%

FTSE 100 - Risers

Ocado Group (OCDO) 745.40p 2.39%
Fresnillo (FRES) 565.60p 1.91%
Rentokil Initial (RTO) 436.10p 1.70%
Entain (ENT) 993.60p 1.68%
Flutter Entertainment (CDI) (FLTR) 13,675.00p 1.60%
Antofagasta (ANTO) 1,663.00p 1.56%
Standard Chartered (STAN) 655.20p 1.39%
Severn Trent (SVT) 2,637.00p 1.38%
Spirax-Sarco Engineering (SPX) 10,245.00p 1.34%
Smith (DS) (SMDS) 310.70p 1.31%

FTSE 100 - Fallers

Burberry Group (BRBY) 1,491.00p -1.55%
Vodafone Group (VOD) 66.51p -1.07%
BP (BP.) 460.75p -1.01%
Scottish Mortgage Inv Trust (SMT) 779.60p -0.76%
Shell (SHEL) 2,520.50p -0.75%
Imperial Brands (IMB) 1,806.50p -0.74%
GSK (GSK) 1,435.80p -0.61%
Compass Group (CPG) 2,072.00p -0.57%
Centrica (CNA) 141.15p -0.56%
Beazley (BEZ) 530.50p -0.56%

FTSE 250 - Risers

Wizz Air Holdings (WIZZ) 2,091.00p 5.58%
FDM Group (Holdings) (FDM) 446.00p 4.94%
Helios Towers (HTWS) 77.70p 4.02%
Johnson Matthey (JMAT) 1,705.00p 3.49%
AO World (AO.) 98.00p 3.16%
Genus (GNS) 2,108.00p 3.13%
Bytes Technology Group (BYIT) 602.50p 2.73%
Chemring Group (CHG) 347.00p 2.51%
Dr. Martens (DOCS) 91.50p 2.29%
AJ Bell (AJB) 318.80p 2.25%

FTSE 250 - Fallers

Diversified Energy Company (DEC) 1,091.50p -15.11%
W.A.G Payment Solutions (WPS) 85.40p -4.90%
GCP Infrastructure Investments Ltd (GCP) 69.20p -2.26%
Vietnam Enterprise Investments (DI) (VEIL) 537.00p -2.19%
Auction Technology Group (ATG) 511.00p -1.92%
Apax Global Alpha Limited (APAX) 158.00p -1.86%
Keller Group (KLR) 800.00p -1.72%
Hipgnosis Songs Fund Limited NPV (SONG) 68.00p -1.59%
LondonMetric Property (LMP) 193.10p -1.48%
Abrdn Private Equity Opportunities Trust (APEO) 448.50p -1.32%