London midday: Stocks turn lower after manufacturing data

London stocks had turned lower by midday on Monday after the release of uninspiring manufacturing data.

The FTSE 100 was down 0.4% at 7,577.17, having opened up amid relief that the US narrowly avoided a government shutdown over the weekend.

A survey out earlier showed the manufacturing sector continued to shrink in September - albeit at a slower pace - as rising interest rates and the cost-of-living crisis took their toll.

The S&P Global/CIPS UK purchasing managers’ index printed at 44.3, up slightly from August's 39-month low of 43.0 and above the flash estimate of 44.2, but still among the weakest readings seen in the last 14 years.

A reading below 50 indicates contraction, while a reading above signals expansion.

Rob Dobson, director at S&P Global Market Intelligence, said: "September saw the manufacturing sector still mired in contraction territory, as weak conditions at home and abroad hit new order intakes and led to a further scaling back of production volumes. The cost-of-living crisis and recent rapid rise in interest rates are taking their toll, according to producers, raising the possibility of the broader UK economy slipping back into contraction during the second half of the year.

"The downturn is being felt throughout the manufacturing sector, with demand falling from both households and businesses. The resulting rise in caution at manufacturers is driving risk aversion and shifting their focus towards margin protection and cost control, highlighted by further cuts in employment, purchasing and inventories. These all point to companies battening down the hatches in expectation of stormy conditions ahead."

Meanwhile, the latest survey from Nationwide showed that annual house prices fell again in September as high interest rates continue to dent affordability.

Annual house prices were down 5.3% in September, in line with the decline seen in August, which was the weakest since July 2009.

On the month, prices were flat, having fallen by 0.8% in August. The average price of a property now stands at £257,808.

Nationwide chief economist Robert Gardner said: "Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, circa 30% below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability. For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment - well above the long-run average of 29%.

"However, investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening. This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing. If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home."

The week before last, the Bank of England stood pat on interest rates for the first time in nearly two years, at 5.25%.

In equity markets, Antofagasta was the top performer on the FTSE 100 after Citi upgraded shares of the Chilean copper miner to ‘buy’ on volume recovery potential and valuation.

Defence contractor BAE Systems rallied after the Ministry of Defence awarded it £3.95bn of funding for the next phase of the UK's next-generation nuclear-powered attack submarine programme, known as SSN-AUKUS.

The shares were also boosted by an upgrade to ‘buy’ from ‘hold’ at Berenberg, which hiked the price target to 1,170p from 1,050p.

United Utilities gained as it unveiled its plans for the 2025-2030 period, projecting expenditure of £13.7bn, leading to 8.7% yearly growth in regulated capital value. The plan will support 30,000 jobs in the north west, including 7,000 new positions, and provide affordability schemes worth £525m, aiding over one-sixth of its customers.

Pennon rallied after saying it traded in line with expectations in its first half and that it submitted plans to Ofwat to invest £2.8bn in water quality and resilience. The investment, for South West Water, relates to the K8 period between 2025 and 2030, and will create 2,000 jobs along with 1,000 apprenticeships and graduates.

Market Movers

FTSE 100 (UKX) 7,577.17 -0.41%
FTSE 250 (MCX) 18,247.41 -0.18%
techMARK (TASX) 4,256.45 -1.98%

FTSE 100 - Risers

Antofagasta (ANTO) 1,449.50p 1.43%
United Utilities Group (UU.) 961.00p 1.35%
InterContinental Hotels Group (IHG) 6,146.00p 1.19%
BAE Systems (BA.) 1,007.50p 0.97%
Vodafone Group (VOD) 77.56p 0.96%
Anglo American (AAL) 2,287.00p 0.95%
Severn Trent (SVT) 2,383.00p 0.76%
International Consolidated Airlines Group SA (CDI) (IAG) 149.10p 0.74%
Standard Chartered (STAN) 762.60p 0.61%
Shell (SHEL) 2,619.50p 0.52%

FTSE 100 - Fallers

Diploma (DPLM) 2,934.00p -2.33%
Rentokil Initial (RTO) 596.00p -2.33%
Smith & Nephew (SN.) 1,002.50p -2.00%
RS Group (RS1) 721.60p -1.88%
Experian (EXPN) 2,644.00p -1.75%
Beazley (BEZ) 544.50p -1.63%
AstraZeneca (AZN) 10,926.00p -1.59%
Hargreaves Lansdown (HL.) 761.40p -1.53%
B&M European Value Retail S.A. (DI) (BME) 577.60p -1.50%
St James's Place (STJ) 820.00p -1.47%

FTSE 250 - Risers

W.A.G Payment Solutions (WPS) 95.80p 4.13%
Digital 9 Infrastructure NPV (DGI9) 40.10p 3.62%
Moonpig Group (MOON) 168.40p 3.19%
FirstGroup (FGP) 155.50p 3.05%
Pennon Group (PNN) 603.50p 2.99%
Mobico Group (MCG) 91.05p 2.53%
NB Private Equity Partners Ltd. (NBPE) 1,622.00p 2.53%
Caledonia Investments (CLDN) 3,435.00p 2.23%
Essentra (ESNT) 165.20p 2.10%
Apax Global Alpha Limited (APAX) 165.80p 2.09%

FTSE 250 - Fallers

Darktrace (DARK) 383.40p -4.96%
Foresight Group Holdings Limited NPV (FSG) 416.00p -3.26%
Intermediate Capital Group (ICP) 1,348.00p -2.53%
Aston Martin Lagonda Global Holdings (AML) 279.00p -2.38%
Petershill Partners (PHLL) 147.80p -2.12%
Jupiter Fund Management (JUP) 94.10p -2.08%
Renishaw (RSW) 3,450.00p -2.04%
Investec (INVP) 472.00p -2.01%
Ascential (ASCL) 205.00p -1.91%
HGCapital Trust (HGT) 382.00p -1.80%