London midday: Stocks stay up but GSK tumbles on Zantac court ruling

London stocks were still in the black by midday on Monday ahead of an expected rate cut by the European Central Bank this week, but GSK tumbled on the back of the latest US court ruling on its heartburn drug Zantac.

The FTSE 100 was up 0.2% at 8,292.49, off earlier highs.

Russ Mould, investment director at AJ Bell, said: "This week brings several key PMI surveys from the US and non-farm payrolls data on Friday, which is always influential as the earliest release based on hard data to offer a barometer of the health of the world’s largest economy.

"On top of this the European Central Bank decision is on Thursday, with its policy makers widely expected to steal a march on their counterparts in Threadneedle Street and at the Federal Reserve by cutting rates for the eurozone."

On the UK macro front, a survey out earlier showed the manufacturing sector returned to growth in May, with output growing at the fastest pace in more than two years.

The S&P Global manufacturing purchasing managers’ index rose to 51.2 from 49.1 in April, coming in above the 50.0 mark that separates contraction from expansion. This marked the highest reading since July 2022 but was just a touch lower than the flash estimate of 51.3.

The survey also showed that business optimism hit its highest level in 27 months, with 63% of companies expecting output to expand over the coming year.

Rob Dobson, director at S&P Global Market Intelligence, said: "May saw a solid revival of activity in the UK manufacturing sector, with levels of production and new business both rising at the quickest rates since early-2022. The breadth of the recovery was also a positive, with concurrent output and new order growth registered for all of the main subindustries (consumer, intermediate and investment goods) and all company size categories for the first time in over two years.

"The latest PMI survey data provided a mixed picture for price pressures at manufacturers, however. At the factory gate, output charge inflation strengthened for the fifth successive month and to its highest level in a year. That said, a solid easing in the rate of increase in input costs should help prevent price pressures from becoming embedded."

In corporate news, there were several reports that online fashion giant Shein was edging closer to a London stock market flotation. It was understood that Shein - which was founded in China and is headquartered in Singapore - is planning to file a confidential prospectus with regulators this month.

Mould said this "would undoubtedly be a boost for a market which has been starved of big new issues in recent times".

"However, Shein may find the glare of a public market listing uncomfortable given concerns about its governance, supply chain and business practices. Boohoo’s recent history provides a salutary lesson here," he added.

"Clearly London will want the IPO to be a success to help rebuild its reputation as a listing venue so there’s a lot riding on it for both parties."

Elsewhere, JD Sports jumped to the top of the FTSE 100, having slumped on Friday after full-year results.

St James’s Place rallied after an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan Cazenove, which cited an attractive valuation and reducing uncertainty. "Whilst we believe that negative news is largely behind us, this has not been reflected in valuation, with St James’s Place trading at 7x FY25e," it said.

"We expect that sentiment will improve given the resilience in gross flows, and we see upside to consensus net flow estimates."

Quilter was up as JPM lifted the shares to ‘overweight’ from ‘neutral’, saying it was "looking beyond the redress".

National Grid got a boost as Citi upped the shares to ‘buy’ from ‘neutral’ and lifted the price target to 985p from 920p, citing an attractive risk/reward.

Pets At Home was lifted by an upgrade to ‘buy’ from ‘hold’ at Liberum, which increased its price target to 360p from 290p.

Hipgnosis traded up after it agreed the terms of an improved cash offer from US private equity firm Blackstone, at $1.31 a share, up from $1.30.

On the downside, GSK tumbled after a US court ruled that jury trials could hear expert witnesses in cases brought by cancer sufferers claiming its Zantac heartburn drug caused their condition. A judge in the Delaware State Court ruled that scientific experts would be able to testify there is a link between the plaintiffs' illnesses and their exposure to probable human carcinogens, through the Zantac drug.

Baltic Classifieds fell after Antler, which is controlled by funds advised by Apax, sold 40m shares in a placing.

Market Movers

FTSE 100 (UKX) 8,292.49 0.21%
FTSE 250 (MCX) 20,896.10 0.80%
techMARK (TASX) 4,835.14 -0.20%

FTSE 100 - Risers

JD Sports Fashion (JD.) 136.30p 6.90%
CRH (CDI) (CRH) 6,460.00p 5.59%
St James's Place (STJ) 519.00p 3.88%
Pershing Square Holdings Ltd NPV (PSH) 4,224.00p 3.58%
easyJet (EZJ) 474.70p 3.20%
Entain (ENT) 693.80p 2.75%
International Consolidated Airlines Group SA (CDI) (IAG) 176.00p 2.68%
Rolls-Royce Holdings (RR.) 465.10p 2.58%
Frasers Group (FRAS) 903.50p 2.50%
Rightmove (RMV) 546.40p 2.48%

FTSE 100 - Fallers

GSK (GSK) 1,605.50p -9.11%
Anglo American (AAL) 2,478.00p -1.41%
United Utilities Group (UU.) 1,004.50p -1.13%
Severn Trent (SVT) 2,360.00p -1.09%
Smith & Nephew (SN.) 980.60p -0.99%
Intermediate Capital Group (ICG) 2,292.00p -0.78%
Rio Tinto (RIO) 5,451.00p -0.46%
Compass Group (CPG) 2,182.00p -0.46%
Melrose Industries (MRO) 613.60p -0.36%
Pearson (PSON) 945.60p -0.25%

FTSE 250 - Risers

Ferrexpo (FXPO) 44.70p 7.58%
Pets at Home Group (PETS) 315.00p 6.35%
Wood Group (John) (WG.) 184.00p 4.01%
Auction Technology Group (ATG) 542.00p 3.83%
Quilter (QLT) 122.30p 3.82%
Essentra (ESNT) 171.00p 3.64%
Discoverie Group (DSCV) 754.00p 3.57%
Wizz Air Holdings (WIZZ) 2,370.00p 3.40%
Aston Martin Lagonda Global Holdings (AML) 150.00p 3.31%
Watches of Switzerland Group (WOSG) 423.00p 3.27%

FTSE 250 - Fallers

Baltic Classifieds Group (BCG) 246.00p -4.09%
Me Group International (MEGP) 180.00p -1.53%
Pennon Group (PNN) 613.00p -1.45%
W.A.G Payment Solutions (WPS) 69.00p -1.43%
Hochschild Mining (HOC) 184.00p -1.39%
Foresight Solar Fund Limited (FSFL) 86.70p -1.14%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 78.90p -1.00%
Petershill Partners (PHLL) 206.00p -0.96%
Energean (ENOG) 1,182.00p -0.92%
The Global Smaller Companies Trust (GSCT) 161.80p -0.74%