London midday: Stocks rise on prospect of fresh BoE stimulus

UK stocks advanced on Friday after the Bank of England said fresh stimulus measures were likely in response to Brexit.

BoE Governor Mark Carney said on late Thursday that some monetary policy easing would be required over coming months to cushion the blow of Britain voting to leave the European Union.

Interest rates have been at 0.5% for more than seven years after being cut during the UK’s downturn and financial crisis.

Nomura’s UK economists expect a 25 basis points (bps) rate cut in August, followed by another 25 bps cut in November. “The MPC may ultimately conclude it can go slightly negative, or it may prefer to keep a marginally positive rate.”

Meanwhile, in economic data, the UK manufacturing sector saw a modest improvement in June, rising to a five-month high. The Markit/CIPS UK manufacturing purchasing managers’ index increased to 52.1 from a revised reading of 50.4 in May. Economists had been expecting a reading of 50.2.

“While the Bank of England remains poised to act if needed and the UK’s trading relationships are unchanged during the two-year negotiation period, there’s a clear risk that ongoing uncertainty will have at least some short term impact on manufacturing during the coming quarters,” said Rob Dobson, senior economist at survey compilers Markit.

“The big question is whether any negative impact from uncertainty can be partly offset by a boost to exports resulting from the fall in the pound.”

China’s official manufacturing PMI fell slightly to 50.0 in June from 50.1 in May, as expected. Caixin’s manufacturing PMI decreased to 48.6 in June from 49.2 the previous month, missing forecasts for a reading of 49.2.

“The manufacturing PMIs continue to disappoint. But given the recent resilience of the service sector and signs of strength in construction, we still aren’t overly concerned about the near-term outlook for China’s economy,” said Capital Economics.

Markit’s final eurozone PMI for June came in at 52.8, up from the flash estimate of 52.6 and May’s reading of 51.5, with growth in new orders and production accelerating to the fastest in the year so far.

The eurozone unemployment rate nudged down in May to its lowest level since July 2011, according to the latest figures from Eurostat. The unemployment rate came in at 10.1%, down from 10.2% in April and 11% in May 2015, and in line with expectations.

In Japan, deflation worsened in May with the consumer price index down 0.4% year-on-year compared to a 0.3% fall the previous month. Analysts had expected CPI to drop 0.5%.

Japanese household spending shrank by 1.1% year-on-year in May, as expected.

The unemployment rate was unchanged at 3.2% in April, the Ministry of Internal Affairs and Communications said, also as expected.

Still to come, US manufacturing PMIs from Markit and ISM at 1445 BST and 1500 BST respectively, US construction spending figures at 1500 BST and the Baker Hughes rig count at 1800 BST.

In the corporate front, Royal Bank of Scotland plunged after Morgan Stanley cut its rating on the stock to ‘equal weight’ from ‘"overweight’ and reduced its earnings forecast by a third for 2017, and by a quarter for 2018.

BHP Billiton was in the red as its plans to settle claims over the 2015 Samarco mine disaster suffered a blow on Friday when a Brazilian court reinstated a AUD$8bn public civil claim.

WPP jumped after the advertising giant said it has agreed to invest in Woven Digital, a US media company aimed at millennials.

Randgold and Fresnillo gained as gold and silver prices rose.

Market Movers

FTSE 100 (UKX) 6,526.81 0.35%
FTSE 250 (MCX) 16,238.09 -0.20%
techMARK (TASX) 3,210.03 -0.20%

FTSE 100 - Risers

Fresnillo (FRES) 1,699.00p 3.35%
WPP (WPP) 1,598.00p 2.96%
Randgold Resources Ltd. (RRS) 8,655.00p 2.91%
Carnival (CCL) 3,397.00p 2.63%
Johnson Matthey (JMAT) 2,873.00p 2.57%
Sky (SKY) 864.50p 1.95%
Standard Chartered (STAN) 575.50p 1.93%
3i Group (III) 558.00p 1.92%
Paddy Power Betfair (PPB) 8,045.00p 1.90%
Merlin Entertainments (MERL) 448.00p 1.75%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 166.50p -2.97%
Travis Perkins (TPK) 1,432.00p -2.85%
BHP Billiton (BLT) 919.20p -2.50%
Antofagasta (ANTO) 454.40p -2.41%
Old Mutual (OML) 195.50p -2.40%
ARM Holdings (ARM) 1,105.00p -2.30%
Marks & Spencer Group (MKS) 312.30p -2.01%
Mediclinic International (MDC) 1,074.00p -1.92%
Barclays (BARC) 135.95p -1.91%
Sage Group (SGE) 635.00p -1.63%

FTSE 250 - Risers

Genus (GNS) 1,658.00p 5.94%
Dignity (DTY) 2,717.00p 5.72%
Dairy Crest Group (DCG) 566.50p 5.40%
Britvic (BVIC) 610.50p 4.36%
TalkTalk Telecom Group (TALK) 227.90p 3.97%
UK Commercial Property Trust (UKCM) 75.00p 3.95%
Hochschild Mining (HOC) 187.10p 3.94%
Essentra (ESNT) 532.00p 3.70%
Ibstock (IBST) 134.60p 3.54%
Wizz Air Holdings (WIZZ) 1,661.00p 3.49%

FTSE 250 - Fallers

Stagecoach Group (SGC) 208.50p -9.78%
Marshalls (MSLH) 226.60p -4.71%
Kaz Minerals (KAZ) 126.70p -4.45%
Metro Bank (MTRO) 1,729.00p -4.37%
SIG (SHI) 107.70p -4.27%
Zoopla Property Group (WI) (ZPLA) 256.00p -3.76%
Daejan Holdings (DJAN) 4,860.00p -3.67%
Polypipe Group (PLP) 251.10p -3.57%
Hill & Smith Holdings (HILS) 860.50p -3.26%
Restaurant Group (RTN) 278.60p -3.13%