London midday: Stocks move into the red but Sainsbury's gains on results

The FTSE 100 was down 0.1% at 7,409.41, unable to hold on to modest opening gains, with volumes lower than usual as major Continental markets are closed for the May Day holiday.

Meanwhile, the pound was up 0.3% against the dollar at 1.3068 and 0.1% firmer versus the euro at 1.1628, despite uninspiring manufacturing data.

Spreadex analyst Connor Campbell said: "With the papers full of reports that Theresa May is closing in on a Brexit deal with Labour, one that’d potentially include a permanent customs union, the pound held firm, adding 0.3% against the dollar - where it’s now at a two-week peak - and 0.1% against the euro."

Figures released earlier showed that UK manufacturing growth slowed in April as the pace of Brexit stockpiling eased.

The IHS Markit/CIPS manufacturing purchasing managers' index fell to a two-month low 53.1 from a 13-month high of 55.1 in March.

Alongside weaker growth in production, new orders and stocks of purchases, the lower PMI level also reflected job losses in the sector.

The data showed that while Brexit stockpiling - the main theme in UK manufacturing in recent months - continued last month, the pace of stockpiling eased as the Brexit deadline was extended to 31 October

Capital Economics economist Andrew Wishart said that while the drop in the manufacturing PMI does not erase all of last month's three-point increase, it still suggests that the sector will slip back into stagnation now that the boost from no-deal Brexit preparations has passed.

Data from the Bank of England revealed that mortgage activity picked up in March as households borrowed an extra £4.1bn secured on property. The level of lending in March followed a quiet February when additional lending was £3.3bn.

But the number of mortgages approved for buying a house fell by about 3,000 in March to 62,300, suggesting continued caution amid economic and political uncertainty. Approvals for remortgaging rose slightly to 49,700 as homeowners snapped up low rates offered by banks and building societies.

Elsewhere, the latest survey from Nationwide showed that UK house price growth ticked up a touch in April but remained subdued. Prices were up 0.4% on the month versus a 0.2% increase in March, and 0.9% on the year in April compared to a 0.7% jump the month before.

Sino-US trade relations were in focus again as US Treasury Secretary Steven Mnuchin tweeted that the latest round of talks between the two nations in Beijing had been productive, with more talks due in Washington next week.

The next big focus will be the Fed's rate announcement, which is due after the UK close at 1900 BST.

Neil Wilson, chief market analyst at Markets.com, said: "Don’t expect the Fed to tie its hands to anything conclusive right now - there are just too many moving parts and policymakers are split over where they think the economy is heading. I would expect that the Fed retains its slight hiking bias - discussions around the possibility of cuts may take place but the Fed should stick to its patient, data dependent mantra."

In UK equity markets, Just Eat was the worst performer on the top-flight index as JPMorgan Cazenove downgraded the stock to 'underweight' from 'overweight' amid "ongoing weakness in the UK and market share losses".

Housebuilder Persimmon was also lower as it said forward sales revenue fell to £2.7bn from £2.8bn on the back of lower reservations in the year to date, adding that building costs would rise by 4%.

On the upside, Sainsbury’s - whose planned merger with Asda has been canned after being blocked by the Competition and Markets Authority - racked up strong gains as its underlying full-year pre-tax profits came in ahead of expectations, up 7.8% to £635m despite a £46m hit from the failure of the deal.

Lloyds Banking Group was higher as it cut its target for its Common Equity Tier 1 ratio, while London Stock Exchange gained as it posted an increase in quarterly income.

Next nudged up as the retailer reported a 4.5% rise in first-quarter total full-price sales thanks to unusually warm weather over the Easter period, beating its own forecast of 3.1% growth.

Market Movers

FTSE 100 (UKX) 7,409.41 -0.12%
FTSE 250 (MCX) 19,818.37 -0.03%
techMARK (TASX) 3,617.26 0.10%

FTSE 100 - Risers

Sainsbury (J) (SBRY) 230.70p 3.69%
London Stock Exchange Group (LSE) 5,119.00p 2.09%
NMC Health (NMC) 2,874.00p 1.84%
Ocado Group (OCDO) 1,384.50p 1.61%
Smurfit Kappa Group (SKG) 2,281.00p 1.60%
Whitbread (WTB) 4,528.00p 1.52%
Paddy Power Betfair (PPB) 6,586.00p 1.51%
Vodafone Group (VOD) 143.94p 1.37%
Smith (DS) (SMDS) 361.70p 1.32%
WPP (WPP) 968.60p 1.28%

FTSE 100 - Fallers

Just Eat (JE.) 682.40p -2.37%
Micro Focus International (MCRO) 1,895.80p -2.17%
Persimmon (PSN) 2,190.00p -2.06%
United Utilities Group (UU.) 813.36p -1.86%
Severn Trent (SVT) 2,003.00p -1.62%
Imperial Brands (IMB) 2,396.64p -1.62%
Pearson (PSON) 816.80p -1.61%
National Grid (NG.) 824.20p -1.42%
AstraZeneca (AZN) 5,662.00p -1.12%
Royal Dutch Shell 'A' (RDSA) 2,424.50p -1.04%

FTSE 250 - Risers

Babcock International Group (BAB) 536.40p 2.17%
Charter Court Financial Services Group (CCFS) 362.25p 2.04%
Metro Bank (MTRO) 764.50p 1.93%
NewRiver REIT (NRR) 233.65p 1.81%
Computacenter (CCC) 1,227.00p 1.66%
Petrofac Ltd. (PFC) 450.50p 1.62%
IP Group (IPO) 101.60p 1.60%
Spirent Communications (SPT) 161.20p 1.51%
Wood Group (John) (WG.) 477.50p 1.49%
Genus (GNS) 2,446.00p 1.41%

FTSE 250 - Fallers

Sirius Minerals (SXX) 16.06p -7.81%
Acacia Mining (ACA) 138.50p -5.33%
Greene King (GNK) 611.20p -4.65%
Indivior (INDV) 36.74p -3.90%
Intu Properties (INTU) 92.60p -1.78%
G4S (GFS) 212.60p -1.67%
Hochschild Mining (HOC) 183.10p -1.61%
EI Group (EIG) 209.80p -1.59%
Domino's Pizza Group (DOM) 263.50p -1.50%
Games Workshop Group (GAW) 4,094.99p -1.47%