London midday: FTSE maintains gains as banks rally
London stocks were still in the black by midday on Tuesday, underpinned by a strong showing in the banking sector, as investors mulled the latest government borrowing figures and manufacturing data.
The FTSE 100 was 0.4% firmer at 7,474.60.
Ahead of the Spring statement on Wednesday, data from the Office for National Statistics showed that borrowing fell in February. The gap between spending and income came in at £13.1bn, down £2.4bn on the same month a year earlier, but marking the second-highest borrowing figure for February since records began in 1993. This was above expectations of £8.5bn and the Office for Budget Responsibility’s forecast of £8.0bn.
However, the figures also showed that borrowing is now £25.9bn lower than the OBR expected for the year so far, and less than half of what was recorded last year, at £138.4bn.
Compared with February 2020, before the pandemic hit, borrowing was up £12.8bn.
The data showed that interest payment on government debt surged 52.7% from a year earlier to a record £8.2bn last month amid soaring inflation.
Martin Beck, chief economic advisor to the EY ITEM Club, said: "While the Chancellor can take heart from a decreasing deficit as he prepares for Wednesday’s Spring Statement, recent geopolitical developments point to a tougher 2022-2023.
"Rising energy and commodity prices means inflation this year is on course to exceed the OBR’s forecast by a significant margin. By depressing real income growth, high inflation will weigh on economic activity and employment, negatively affecting tax receipts. It will also add further to the interest cost of inflation-linked gilts.
"Borrowing may also be lifted if the Chancellor responds to recent calls for more fiscal activism to alleviate cost of living pressures, such as cutting fuel duty or raising benefits. With so many moving parts, and uncertainty over how much of the recent strength in tax receipts will prove persistent, predicting the medium-term fiscal outlook is tricky. But we won’t have to wait long for more clarity."
Elsewhere, a survey from the Confederation of British Industry showed the proportion of manufacturers expecting to raise prices in the next three months hit a record high in March amid inflationary pressures.
The balance of manufacturers expecting to lift prices rose to +80 from +77 in February, hitting the highest level since the question was first asked in the survey in 1975.
Total order books matched the record level seen in November last year at +26%, compared to +20% in February.
Tom Crotty, group director at INEOS and chair of the CBI Manufacturing Council, said: "It is positive to see that total order books remained strong in March, with export orders above normal to the greatest since extent since March 2019. Manufacturing output volumes also grew at a significant pace in the first three months of 2022.
"However, the Ukraine conflict has created further headwinds to an already challenging context for the manufacturing sector. The primary business focus is of-course on supporting the humanitarian crisis and evaluating their operations in Ukraine and Russia. But the shock to energy and other commodity markets, along with the potential for trade spillovers, will further add to the cost-of-living squeeze. Manufacturers will be looking to the upcoming Spring Fiscal Event to provide support through these challenges."
In equity markets, banks were the standout performers, with HSBC, NatWest and Standard Chartered all higher, boosted by hawkish comments overnight from US Federal Reserve Chair Jerome Powell. In a speech at the National Association of Business Economics conference, Powell said the US central bank must move "expeditiously" to raise rates and possibly "more aggressively" as it looks to combat inflation.
JD Sports rallied following well-received third-quarter earnings from Nike in the US, while TP Icap surged to the top of the FTSE 250 after an upgrade to ‘buy’ from ‘hold’ at Shore Capital.
IT infrastructure provider Softcat rise after it said first-half profit was ahead of its expectations and that the outturn for the full year would be ahead of previous estimates.
On the downside, B&Q owner Kingfisher lost ground after it said current-year first-quarter sales were down 8.1%, as it reported 2021/22 profits up by a third.
Review website Trustpilot also fell as it reported a jump in full-year revenue but a widening of its pre-tax losses to $26.6m from $12.9m.
Diploma was knocked lower by a downgrade to ‘underweight’ from ‘neutral’ at JPMorgan.
Market Movers
FTSE 100 (UKX) 7,474.60 0.43%
FTSE 250 (MCX) 21,053.42 0.22%
techMARK (TASX) 4,326.96 -0.37%
FTSE 100 - Risers
Prudential (PRU) 1,123.00p 3.60%
HSBC Holdings (HSBA) 517.80p 3.39%
Standard Chartered (STAN) 521.20p 3.00%
NATWEST GROUP PLC ORD 100P (NWG) 222.20p 2.97%
Lloyds Banking Group (LLOY) 49.90p 2.60%
Aviva (AV.) 435.60p 2.18%
British American Tobacco (BATS) 3,231.50p 2.13%
Melrose Industries (MRO) 132.95p 2.11%
Anglo American (AAL) 3,988.00p 1.99%
Imperial Brands (IMB) 1,636.00p 1.96%
FTSE 100 - Fallers
Kingfisher (KGF) 275.10p -5.56%
Auto Trader Group (AUTO) 644.80p -4.67%
Croda International (CRDA) 7,262.00p -3.43%
Rightmove (RMV) 649.00p -3.39%
Ocado Group (OCDO) 1,064.00p -3.01%
B&M European Value Retail S.A. (DI) (BME) 570.80p -2.59%
Halma (HLMA) 2,473.00p -2.48%
Dechra Pharmaceuticals (DPH) 4,124.00p -2.23%
ITV (ITV) 81.06p -2.10%
CRH (CDI) (CRH) 3,319.00p -1.95%
FTSE 250 - Risers
TP Icap Group (TCAP) 128.10p 7.65%
Baltic Classifieds Group (BCG) 136.00p 4.62%
Softcat (SCT) 1,793.00p 4.30%
UK Commercial Property Reit Limited (UKCM) 84.20p 4.08%
National Express Group (NEX) 232.60p 4.03%
Sirius Real Estate Ltd. (SRE) 125.20p 3.99%
Virgin Money UK (VMUK) 181.05p 3.52%
Homeserve (HSV) 697.50p 3.10%
Network International Holdings (NETW) 250.00p 3.09%
Beazley (BEZ) 418.90p 3.00%
FTSE 250 - Fallers
Trustpilot Group (TRST) 134.30p -17.00%
Diploma (DPLM) 2,604.00p -5.99%
Oxford Biomedica (OXB) 650.00p -4.13%
Morgan Advanced Materials (MGAM) 309.00p -2.83%
AJ Bell (AJB) 295.80p -2.57%
3i Infrastructure (3IN) 340.00p -2.44%
Bellway (BWY) 2,804.00p -2.20%
Syncona Limited NPV (SYNC) 171.00p -1.95%
Marks & Spencer Group (MKS) 159.65p -1.90%
Weir Group (WEIR) 1,861.00p -1.90%