London midday: Stocks rise as pound suffers flash crash

London stocks gained on Friday as the pound suffered a flash crash on what was suspected as automated trading.

The pound fell as much as 6% against the dollar to $1.1841 before recovering to $1.2329 at 1126 BST.

The Bank of England said it is looking into the cause of the crash, which analysts believe was triggered by automated trading systems reacting to a Financial Times report about French President Francois Hollande demanding "tough Brexit negotiations".

“The cause of the crash in the pound is still unknown, with a number of factors probably at play including a fat finger trade, very low liquidity, a large number of stops being triggered and algorithms exacerbating the move,” said Craig Erlam, senior market analyst at Oanda.

“While the pound has recovered a large majority of its losses, it continues to trade well below yesterday’s levels which just goes to show how pessimistic people are about the UK economy in a week in which people have come to realise that a hard Brexit, or something that resembles it, is not just a possibility but a probability.”

On the data front, UK industrial production unexpectedly declined in August, while manufacturing production rose less than expected, according to the Office for National Statistics.

Industrial production fell 0.4% on the month versus expectations of a 0.1% increase. On the year, it rose 0.7%, which was less than the 1.3% jump forecast.

Manufacturing production was up 0.2% on the month compared to expectations of a 0.4% increase. It rose 0.5% on the year, missing expectations of a 0.8% gain.

Separately, the ONS revealed the total UK trade deficit for goods and services increased in August by £2.5bn from the month before to £4.7bn, as imports rose more than exports.

UK house price growth eased in the three months to September, adding to signs the housing market is slowing after the EU referendum in June, according to Halifax.

Prices rose an annualised 5.8% in the quarter to an average of £214,024 following a 6.9% year-on-year increase in the three months to August. It marked the slowest pace in more than three years and comes after Britain voted to leave the European Union on 23 June.

Turning to afternoon trade, the US non-farm payrolls report will be in focus as the Federal Reserve closely scrutinises data in determining the timing of the next interest rate hike. Analysts expect employers added 170,000 jobs in September and the unemployment rate held at 4.9%. The data is due at 1330 BST.

Meanwhile, oil prices were a touch lower but keeping their head above the $50 a barrel mark following reports that some OPEC members and Russia will meet next week to talk about Russia’s involvement in the joint production cut. West Texas Intermediate was down 0.3% at $50.27 a barrel and Brent crude was 0.5% lower at $52.24.

Among corporate stocks, housebuilding stocks were under pressure after the Halifax data showed a slowdown in the market. Barratt Developments, Taylor Wimpey and Persimmon slumped.

Mining stocks rallied, including BHP Billiton and Anglo American, benefitting from a weaker pound.

easyJet’s shares descended after Bank of America Merrill Lynch downgraded the low-cost carrier to ‘neutral’ from ‘buy’ and cut the price target to 1,050p from 1,300p given the increasing lack of visibility on pricing. On Thursday easyJet warned that profits for the year would be hit by the weakening of the pound.

Market Movers

FTSE 100 (UKX) 7,052.98 0.76%
FTSE 250 (MCX) 18,028.98 -0.48%
techMARK (TASX) 3,557.93 0.54%

FTSE 100 - Risers

Pearson (PSON) 820.50p 3.34%
Burberry Group (BRBY) 1,464.00p 2.74%
BHP Billiton (BLT) 1,234.50p 2.70%
Anglo American (AAL) 1,025.00p 2.66%
Randgold Resources Ltd. (RRS) 7,060.00p 2.54%
Fresnillo (FRES) 1,655.00p 2.54%
Aviva (AV.) 454.00p 2.41%
HSBC Holdings (HSBA) 616.80p 2.36%
Standard Chartered (STAN) 670.50p 2.35%
Royal Dutch Shell 'A' (RDSA) 2,072.00p 2.35%

FTSE 100 - Fallers

Barratt Developments (BDEV) 480.20p -4.91%
Dixons Carphone (DC.) 347.00p -4.36%
Marks & Spencer Group (MKS) 316.90p -4.14%
International Consolidated Airlines Group SA (CDI) (IAG) 366.30p -3.93%
Taylor Wimpey (TW.) 147.40p -3.91%
Persimmon (PSN) 1,752.00p -3.89%
ITV (ITV) 177.10p -3.75%
Travis Perkins (TPK) 1,470.00p -3.73%
easyJet (EZJ) 899.00p -3.70%
Sainsbury (J) (SBRY) 236.30p -3.51%

FTSE 250 - Risers

Evraz (EVR) 195.30p 5.57%
Smith (DS) (SMDS) 413.20p 3.77%
Kaz Minerals (KAZ) 240.60p 3.57%
Acacia Mining (ACA) 476.30p 3.57%
Amec Foster Wheeler (AMFW) 610.50p 3.04%
Centamin (DI) (CEY) 149.70p 3.03%
BTG (BTG) 703.50p 2.85%
Hochschild Mining (HOC) 256.50p 2.68%
Petrofac Ltd. (PFC) 934.50p 2.58%
Halma (HLMA) 1,114.00p 2.58%

FTSE 250 - Fallers

Fidessa Group (FDSA) 2,317.00p -5.97%
Sports Direct International (SPD) 282.90p -5.83%
Ladbrokes (LAD) 134.40p -5.22%
Countrywide (CWD) 199.20p -5.10%
Redrow (RDW) 389.20p -4.44%
St. Modwen Properties (SMP) 272.80p -4.28%
Bovis Homes Group (BVS) 822.50p -4.25%
Crest Nicholson Holdings (CRST) 433.80p -4.20%
JRP Group (JRP) 133.30p -4.10%
Bellway (BWY) 2,276.00p -4.09%