London midday: Stocks push higher as pound hit by construction data

London stocks had extended gains by midday on Tuesday as the pound came under pressure after the release of weak UK construction data.

The FTSE 100 was up 0.6% at 7,545.11, while the pound was down 0.2% against the dollar at 1.2619 and 0.3% weaker versus the euro at 1.1169 after figures showed that UK construction output plunged to a 10-year low in June.

Hot on the heels of Monday's dismal manufacturing figures, the IHS Markit CIPS construction total activity index fell to 41.3 last month from 48.6 in May, missing expectations for a rise to around 49.2.

It was the fourth time in the last five months that the index has come in below 50.0 - the level that separates contraction from expansion.

All three construction categories recorded falls in output. The previously strong housebuilding sector reported its largest fall for three years, while commercial work’s decline was the steepest since December 2009. Civil engineering fell at the fastest rate since October 2009.

Total new work decreased for the third month in a row, with the most recent contraction the sharpest rate of decline since April 2009.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, called the PMI data a "worrying step change in the impact of the Brexit uncertainty".

He said: "The threat of a no-deal Brexit reportedly has dampened demand for commercial projects, while the risk of a Corbyn government following a general election has hindered activity in civil engineering."

However, Tombs argued that the downturn could be brief: "Employment held steady in June, while expectations for levels of future activity improved slightly and were in line with those in the last six months. Builders cited impending infrastructure projects as a key reason to remain optimistic. Many clients also reportedly have scoped out projects, but are waiting until political uncertainty subsides.

"So if, as we expect, the Brexit deadline is pushed back again in October, the construction sector should experience a quick recovery around the turn of the year."

Investors were also digesting the latest survey from Nationwide, which showed house price growth remained subdued in June. House prices were up just 0.1% on the month. Although this was an improvement on the 0.2% decline seen in May, it was a touch below consensus forecasts of 0.2% growth.

On the year, house price growth eased to 0.5% in June from 0.6% in May, in line with consensus.

More broadly, trade relations between the US and China remained very much in focus after US President Trump said on Monday that talks between the two nations were underway again following last week's G20 summit in Japan.

Spreadex analyst Connor Campbell pointed out that doubts were beginning to creep in about the likelihood of a deal being struck.

"By the end of Monday’s session the enthusiasm for the US/China trade truce had waned somewhat, investors turning to the tougher questions surrounding the likelihood of an actual deal being reached any time soon," he said. "After all, the superpowers have been here before, with the most recent set of tariffs in part such a surprise because there two sides had reportedly been so close to an agreement earlier in the year."

In equity markets, shares of online trading platform Plus500 rallied as it said second-quarter revenue rose to $94m from $53.9m in the first quarter, which was hit by lower volatility and EU rules on leveraged betting.

Stagecoach was boosted by an upgrade at Liberum.

On the downside, advertising giant WPP was in the red after confirming late on Monday that it was in exclusive discussions with private equity firm Bain Capital about the sale of its majority stake in market research group Kantar, in a deal that would value the business at $4bn.

Funding Circle suffered heavy losses as it slashed full-year revenue growth expectations from 40% to approximately 20%, warning that an increasingly uncertain economic outlook has reduced demand for loans.

Jupiter Fund Management was under the cosh after it revealed a day earlier that fund manager Alexander Darwall was leaving the company to set up his own business. Darwall, who manages its European Opportunities Trust, has taken steps to launch a new investment management company, Devon, in London.

Croda International was the worst performer on the FTSE 100 after a downgrade to 'neutral' at UBS, while InterContinental Hotels was dented by a downgrade to 'sell' at UBS, and Auto Trader was knocked lower by a downgrade to 'hold' by Peel Hunt.

Market Movers

FTSE 100 (UKX) 7,545.11 0.64%
FTSE 250 (MCX) 19,641.97 0.04%
techMARK (TASX) 3,690.22 0.32%

FTSE 100 - Risers

Reckitt Benckiser Group (RB.) 6,315.00p 2.48%
Coca-Cola HBC AG (CDI) (CCH) 3,042.00p 2.08%
National Grid (NG.) 856.30p 2.05%
Severn Trent (SVT) 2,094.00p 2.05%
Rentokil Initial (RTO) 403.30p 1.84%
Morrison (Wm) Supermarkets (MRW) 206.90p 1.72%
Aviva (AV.) 429.30p 1.71%
Imperial Brands (IMB) 1,918.20p 1.58%
Fresnillo (FRES) 866.20p 1.57%
SSE (SSE) 1,153.50p 1.54%

FTSE 100 - Fallers

Croda International (CRDA) 4,850.00p -4.72%
InterContinental Hotels Group (IHG) 5,161.00p -3.10%
ITV (ITV) 108.15p -2.57%
Antofagasta (ANTO) 925.20p -2.53%
WPP (WPP) 990.60p -2.11%
Flutter Entertainment (FLTR) 6,066.00p -1.72%
Mondi (MNDI) 1,795.50p -1.56%
NMC Health (NMC) 2,483.77p -1.36%
Schroders (SDR) 3,065.00p -1.32%
Melrose Industries (MRO) 183.00p -1.29%

FTSE 250 - Risers

Oxford Instruments (OXIG) 1,350.80p 3.91%
Pets at Home Group (PETS) 197.20p 3.79%
Plus500 Ltd (DI) (PLUS) 557.00p 3.34%
Contour Global (GLO) 184.60p 2.56%
Lancashire Holdings Limited (LRE) 717.50p 2.35%
Hikma Pharmaceuticals (HIK) 1,790.00p 2.17%
Hochschild Mining (HOC) 197.20p 2.12%
Entertainment One Limited (ETO) 404.60p 2.12%
CLS Holdings (CLI) 224.00p 2.05%
Pennon Group (PNN) 755.20p 1.89%

FTSE 250 - Fallers

Funding Circle Holdings (FCH) 125.20p -23.19%
Jupiter Fund Management (JUP) 404.80p -6.30%
Kaz Minerals (KAZ) 589.60p -4.16%
Premier Oil (PMO) 79.18p -3.37%
Future (FUTR) 1,004.00p -3.09%
Intu Properties (INTU) 74.30p -2.75%
Travis Perkins (TPK) 1,289.50p -2.35%
Sirius Minerals (SXX) 14.70p -1.93%
Convatec Group (CTEC) 144.05p -1.81%
GVC Holdings (GVC) 657.80p -1.76%