London open: Stocks edge up but gains limited as China downgrades growth

London stocks rose in early trade on Tuesday but gains were limited following the release of disappointing Chinese services data and a downgrade to China's growth forecasts.

At 0845 GMT, the FTSE 100 was up 0.2% at 7,146.71, while the pound was flat against the dollar at 1.3177 and 0.1% firmer versus the euro at 1.1637.

Overnight, China's Caixin/Markit services purchasing managers' index for February came in at 51.1, down from January's reading of 53.6 and marking the lowest level since October. It was also well below economists' expectations for a reading of 53.5.

In addition, Beijing said it now expects the economy to grow between 6% and 6.5% this year, down from 6.6% growth in 2018. However, it also unveiled $298bn in tax cuts as it looks to boost growth.

Spreadex analyst Connor Campbell said: "This basically just reminded investors about the severe impact of the trade war, and, even with the weekend’s reports of a potential meeting between Trump and Xi Jinping, led to a muted open."

On the UK data front, the latest figures from the British Retail Consortium and KPMG showed that the value of retail sales edged up 0.5% in February compared with the year before, and fell 0.1% on a same-store basis.

Pantheon Macroeconomics said: "Uncertainty about Brexit appears to be preventing the current pick-up in households’ income growth, primarily driven by stronger wage growth, from feeding through to spending. Even so, uncertainty is not pronounced enough to cause growth in spending to slow fundamentally either.

"Like-for-like sales growth in February was only slightly below last year’s average, 0.1%. That’s a good result, following January’s rapid growth. On a three-month average basis, year-over-year growth in food sales, 2.4%, still greatly exceeded non-food sales, -0.4%, pointing to some caution among households around non-essentials spending.

"Unusually warm weather does not appear to have lifted clothing sales. But overall, the BRC data do not change our view that continued steady growth in households’ spending will ensure that GDP remains on a slightly rising path in Q1."

Still to come, Markit's services PMI is at 0930 GMT. "The services reading is set to slip from 50.1 to 50.0, leaving it in danger of dipping into contraction territory itself," said Campbell.

In corporate news, Vodafone was the top riser after confirming that it is aiming to raise roughly €4bn from convertible securities to fund the acquisition of Liberty Global's assets in Germany, Czech Republic, Hungary and Romania.

Brick manufacturer Ibstock was higher as it sounded an upbeat note on the outlook and reported a 19% increase in full-year pre-tax profit, while John Laing gained as investors welcomed a jump in full-year profit and net asset value.

Animal genetics specialist Genus was boosted by an upgrade to 'buy' at Liberum.

On the downside, Intertek suffered heavy losses even as the product testing and inspection group reported an increase in 2018 profit as revenue rose amid growing demand.

Equipment rental firm Ashtead was in the red as it said profit and revenue rose in the third quarter, but that capital expenditure will be towards the upper end of its previous guidance.

GVC Holdings shares were down even as the sports betting and gaming group reported underlying profits at the top end of its full-year guidance and got off to a strong start to 2019 as its extracted benefits from its acquisition of Ladbrokes Coral.

BBA Aviation was also on the back foot despite its full-year revenues coming in slightly ahead of consensus expectations.

Ted Baker retreated as Stifel cut its stance on the stock to 'sell' from 'hold' a day after the retailer said chief executive Ray Kelvin had resigned following last year's "forced hugging" scandal.

Market Movers

FTSE 100 (UKX) 7,146.71 0.17%
FTSE 250 (MCX) 19,403.31 -0.04%
techMARK (TASX) 3,481.19 0.25%

FTSE 100 - Risers

Vodafone Group (VOD) 133.42p 1.57%
Standard Chartered (STAN) 631.50p 1.19%
Evraz (EVR) 588.20p 1.10%
Standard Life Aberdeen (SLA) 251.97p 1.09%
Unilever (ULVR) 4,034.50p 0.88%
Rightmove (RMV) 500.40p 0.85%
Schroders (SDR) 2,807.00p 0.83%
Imperial Brands (IMB) 2,579.50p 0.76%
BT Group (BT.A) 215.45p 0.70%
Rolls-Royce Holdings (RR.) 901.00p 0.65%

FTSE 100 - Fallers

Intertek Group (ITRK) 5,036.00p -2.93%
Ashtead Group (AHT) 2,007.00p -2.86%
GVC Holdings (GVC) 641.50p -1.46%
Marks & Spencer Group (MKS) 279.40p -1.31%
Ocado Group (OCDO) 1,033.00p -1.29%
Pearson (PSON) 832.80p -1.19%
Persimmon (PSN) 2,437.00p -0.93%
Sainsbury (J) (SBRY) 231.55p -0.92%
Smith (DS) (SMDS) 344.10p -0.72%
Barratt Developments (BDEV) 601.07p -0.71%

FTSE 250 - Risers

Ibstock (IBST) 259.59p 3.26%
Genus (GNS) 2,242.16p 2.57%
Vivo Energy (VVO) 132.53p 2.54%
Phoenix Group Holdings (PHNX) 722.00p 2.19%
Amigo Holdings (AMGO) 231.90p 2.16%
Synthomer (SYNT) 372.20p 1.97%
Spirent Communications (SPT) 156.88p 1.87%
Sabre Insurance Group (SBRE) 283.00p 1.80%
Acacia Mining (ACA) 206.75p 1.80%
Mitchells & Butlers (MAB) 291.82p 1.68%

FTSE 250 - Fallers

Ted Baker (TED) 1,887.00p -4.79%
BBA Aviation (BBA) 244.00p -3.94%
Aston Martin Lagonda Global Holdings (AML) 1,013.20p -3.02%
TI Fluid Systems (TIFS) 183.50p -2.39%
Paragon Banking Group (PAG) 422.60p -2.09%
RHI Magnesita N.V. (DI) (RHIM) 4,372.00p -2.06%
William Hill (WMH) 175.70p -1.95%
Fisher (James) & Sons (FSJ) 2,106.21p -1.58%
Domino's Pizza Group (DOM) 236.80p -1.37%
Provident Financial (PFG) 588.71p -1.32%