London close: FTSE ends lower as UK manufacturing growth slows, pound jumps
The FTSE 100 finished Thursday’s session on the back foot after data showed a slowdown in UK manufacturing activity growth due to a weaker pound stoking price pressures.
London's top tier index closed down 0.45% to 6,752.93 points.
The Markit/CIPS manufacturing purchasing managers’ index fell to 53.4 in November from 54.2 the month before and a 27-month high of 55.4 in September, missing expectations for a reading of 54.5. However, it remained above the 50 level that separates an expansion from a contraction.
The pound rose 0.65% against the dollar to $1.2587 - and hit an intra-day high of 1.2697 - in response to higher manufacturing input costs that raise the chance of higher consumer prices next year. Bank of England Governor Mark Carney has said the central bank will have limited tolerance to inflation rising above its 2% target, which could prompt a hike in interest rates.
Talk in the markets about higher-than-expected odds of a so-called soft-Brexit also gave Sterling a leg up.
Consumer goods stocks declined on the increase in input costs. “The concern is firms will eat the higher costs, at the expense of profits to offer competitive prices over Christmas,” said Jasper Lawler, market analyst at CMC Markets.
Earlier, data showed China manufacturing growth slowed but it was better than expected.
Caixin's Chinese manufacturing sector PMI slipped from a 27-month high of 51.2 in October to 50.9 for November. However, it was above forecasts for a reading of 50.8.
In the Eurozone, IHS Markit’s final manufacturing PMI came in at 53.7 in November, in line with the flash estimate and up from 53.5 in October.
Separately, the Eurozone unemployment rate fell to 9.8% from 9.9% the month before and 10.6% in October 2015. This is the lowest rate recorded in the euro bloc since July 2009. The rate for September was revised down to 9.9% from a previous estimate of 10%
Stateside, Markit’s final US manufacturing PMI rose to 54.1 last month from 53.4 in October and the flash reading of 53.9. Analysts had expected no change to the PMI.
The ISM’s headline US manufacturing index rose to 53.2 from 51.9 the month before, beating expectations of a 52.2 reading and marking its highest level in five months.
In other US data, the Labor Department revealed initial jobless claims rose by 17,000 to 268,000 in the week to 26 November, compared to forecasts of 253,000.
The attention now turns to Friday’s highly-awaited US non-farm payrolls report. Healthy figures are likely to increase the odds the Federal Reserve will raise interest rates this month.
“In reality, only a catastrophically bad figure will be able to put a dent in the prevailing belief that the Fed is 100% certain to move,” said IG’s Chris Beauchamp.
Meanwhile, oil prices continued to rally after OPEC on Wednesday agreed to reduce production by 1.2m barrels a day to 32.5m barrels from January next year.
Brent crude rose 4.3% to $54.16 per barrel and West Texas Intermediate edged up 4.05% to $51.50 per barrel at 1631 GMT.
Oil giants BP and Royal Dutch Shell benefitted from the oil price surge.
Elsewhere, Legal & General gained as Barclays raised its rating on the stock to ‘overweight’ from ‘equal weight’ and lifted the target price to 276p from 194p, saying it believes the risk of a UK recession has faded while the Solvency II capital requirements of writing bulk annuities is much more efficient than previously expected.
Dixons Carphone racked up some healthy gains as Credit Suisse initiated coverage of the stock at ‘outperform’ with a 12-month 420p price target, implying a one-year total shareholder return of 30%.
TalkTalk slumped as JPMorgan Cazenove downgraded the stock to ‘underweight’ from ‘neutral' and slashed the price target to 150p from 230p.
Severn Trent retreated as its stock went ex-dividend.
Market Movers
FTSE 100 (UKX) 6,752.93 -0.45%
FTSE 250 (MCX) 17,497.34 -0.28%
techMARK (TASX) 3,216.37 -1.09%
FTSE 100 - Risers
Dixons Carphone (DC.) 344.40p 3.80%
Royal Dutch Shell 'B' (RDSB) 2,178.00p 2.81%
Royal Bank of Scotland Group (RBS) 199.70p 2.78%
Legal & General Group (LGEN) 241.90p 2.76%
Antofagasta (ANTO) 705.50p 2.39%
Royal Dutch Shell 'A' (RDSA) 2,073.00p 2.32%
BP (BP.) 470.05p 2.31%
Capita (CPI) 535.00p 2.00%
BHP Billiton (BLT) 1,339.00p 1.94%
Prudential (PRU) 1,578.00p 1.91%
FTSE 100 - Fallers
Coca-Cola HBC AG (CDI) (CCH) 1,633.00p -3.94%
DCC (DCC) 5,920.00p -3.43%
Severn Trent (SVT) 2,113.00p -3.38%
Land Securities Group (LAND) 939.00p -3.20%
Croda International (CRDA) 3,159.00p -3.16%
Mondi (MNDI) 1,585.00p -3.12%
Unilever (ULVR) 3,094.50p -3.10%
Compass Group (CPG) 1,329.00p -3.06%
Carnival (CCL) 3,925.00p -2.94%
WPP (WPP) 1,659.00p -2.87%
FTSE 250 - Risers
Euromoney Institutional Investor (ERM) 1,178.00p 10.48%
Hunting (HTG) 581.50p 7.41%
Tullow Oil (TLW) 315.40p 5.91%
Weir Group (WEIR) 1,909.00p 5.59%
Keller Group (KLR) 805.50p 3.86%
Wizz Air Holdings (WIZZ) 1,733.00p 3.64%
Aggreko (AGK) 845.50p 3.43%
IMI (IMI) 1,002.00p 3.40%
Fisher (James) & Sons (FSJ) 1,659.00p 3.30%
Cairn Energy (CNE) 215.30p 3.01%
FTSE 250 - Fallers
IG Group Holdings (IGG) 790.50p -5.77%
Britvic (BVIC) 542.00p -5.16%
TalkTalk Telecom Group (TALK) 152.50p -4.51%
Grainger (GRI) 215.50p -4.35%
Ascential (ASCL) 265.10p -4.05%
Brewin Dolphin Holdings (BRW) 276.00p -3.97%
Big Yellow Group (BYG) 639.00p -3.84%
Safestore Holdings (SAFE) 329.00p -3.80%
PZ Cussons (PZC) 297.40p -3.69%
Paysafe Group (PAYS) 374.60p -3.48%