London close: Sterling strength sends equities lower

The FTSE 100 ended the session down 1.7% at 5,862.05, and the FTSE 250 was off 1.03% at 17,604.60.

Sterling was rising against its major trading pairs, last advancing 0.3% on the dollar to $1.3410 and strengthening 0.21% against the euro to €1.1224.

A firmer pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from overseas.

“It’s been a pretty dire day on the London market with the FTSE [reaching] its weakest close in three months,” said Markets.com chief market analyst Neil Wilson.

“A stronger pound undoubtedly took the wind out of the sails and a bit of a catchup trade was in play after the market was closed for the bank holiday on Monday, meaning it didn’t take part in the mild sell-off across Europe yesterday.”

But Wilson said the index’s troubles were not a new phenomenon.

“We’re trading today where it first ventured in March 1998 and Scotland still had a World Cup finals to look forward to.

“The dim and distant past, in other words.”

A private sector survey released earlier showed Chinese factory activity rose at its fastest pace for almost a decade in August as export orders increased for the first time this year.

The Caixin/Markit manufacturing purchasing managers' index rose to 53.1 from 52.8 a month earlier, beating the consensus forecast of 52.6.

A reading of 50 separates growth from expansion.

The reading was the fourth straight month of manufacturing growth and the sector's biggest expansion since January 2011.

Factories in the world's second-biggest economy reported the first rise in new export orders of 2020 as overseas markets unlocked their economies, leading to a big gain in Chinese production.

There was some good news on home shores too, as a survey showed factory output rose at its fastest rate for more than six years as activity picked up after the Covid-19 lockdown, although manufacturers continued to cut jobs.

The IHS Markit/CIPS purchasing managers' index rose to a 30-month high of 55.2 in August, up from 53.3 in July.

That was just short of an earlier "flash" reading.

Manufacturing production rose at the fastest pace since May 2014 with solid expansion across the sector.

Intermediate goods had the strongest growth and investment goods were weakest.

However, factories cut jobs for the seventh month running in one of the steepest declines in the past 11 years.

Job cuts hit all parts of the sector and firms of all sizes.

In equity markets, engine maker and dollar-earner Rolls-Royce slid 12.8%.

Elsewhere, British Airways and Iberia parent IAG was 6.38% weaker after a downgrade to ‘neutral’ at JPMorgan, while investment platform AJ Bell was knocked 2.78% lower by a rating downgrade at Jefferies.

Trainline slumped 5.55% after the company’s chief executive sold 800,000 shares, while budget airline Wizz Air flew 7.23% lower after saying it expects capacity for the second quarter to remain at roughly 60%.

On the upside, Dunelm rose 4.34% after saying trading was well ahead of its expectations in the past two months, helped by demand that built up during the Covid-19 lockdown.

The homewares retailer said total sales surged 59% in July from a year earlier partly from pent-up demand from store closures and the timing of its summer sale. Sales rose 24% in August.

Precious metals miners Fresnillo, Polymetal and Hochschild rose 4.55%, 0.2% and 3.82% as gold prices advanced, while miners such as Glencore, Anglo American and Antofagasta were boosted 2.16%, 1.31% and 1.26% by the solid Chinese manufacturing data.

Market Movers

FTSE 100 (UKX) 5,862.05 -1.70%
FTSE 250 (MCX) 17,604.60 -1.03%
techMARK (TASX) 3,749.05 -1.90%

FTSE 100 - Risers

Fresnillo (FRES) 1,327.50p 4.55%
BHP Group (BHP) 1,751.60p 2.27%
Glencore (GLEN) 172.62p 2.16%
Anglo American (AAL) 1,856.60p 1.31%
Antofagasta (ANTO) 1,087.50p 1.26%
Smiths Group (SMIN) 1,412.50p 0.93%
Auto Trader Group (AUTO) 568.00p 0.85%
Avast (AVST) 540.00p 0.75%
Rightmove (RMV) 638.00p 0.66%
Scottish Mortgage Inv Trust (SMT) 967.00p 0.57%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 206.70p -14.27%
International Consolidated Airlines Group SA (CDI) (IAG) 200.50p -6.38%
Melrose Industries (MRO) 95.48p -6.21%
ITV (ITV) 57.44p -6.03%
WPP (WPP) 609.40p -5.61%
Barclays (BARC) 106.00p -5.41%
NATWEST GROUP PLC ORD 100P (NWG) 106.70p -5.41%
Informa (INF) 394.10p -5.37%
Lloyds Banking Group (LLOY) 27.00p -4.97%
Schroders (SDR) 2,764.00p -4.62%

FTSE 250 - Risers

Pershing Square Holdings Ltd NPV (PSH) 2,130.00p 5.71%
Airtel Africa (AAF) 59.90p 4.74%
Dunelm Group (DNLM) 1,491.00p 4.34%
FDM Group (Holdings) (FDM) 1,088.00p 4.21%
Helios Towers (HTWS) 159.40p 3.92%
Hochschild Mining (HOC) 249.80p 3.82%
Apax Global Alpha Limited (APAX) 172.80p 2.98%
Rank Group (RNK) 139.20p 2.96%
Fisher (James) & Sons (FSJ) 1,262.00p 2.77%
Polar Capital Technology Trust (PCT) 2,225.00p 2.53%

FTSE 250 - Fallers

Ascential (ASCL) 289.60p -8.12%
AO World (AO.) 186.80p -7.30%
Hammerson (HMSO) 45.00p -7.08%
Provident Financial (PFG) 229.40p -7.06%
Meggitt (MGGT) 271.00p -6.57%
Essentra (ESNT) 287.60p -6.20%
Inchcape (INCH) 474.80p -6.07%
Aggreko (AGK) 449.80p -5.83%
Trainline (TRN) 374.20p -5.55%
National Express Group (NEX) 118.80p -5.48%