London close: BP and Just Eat lead gains as pound sinks on weak data
London stocks just held onto gains on Tuesday as weak manufacturing data sent the pound sinking to its lowest level since early January.
The FTSE 100 closed 0.15% higher at 7,520.36 as the pound dropped 1.1% against the dollar to 1.3618 and slipped 0.45% versus the euro to 1.1345 after data showed that growth in the UK's manufacturing sector fell to a 17-month low in April, further reducing the odds of an interest rate hike at the Bank of England's monetary policy meeting next week.
Howard Archer, chief economic advisor to the EY ITEM Club, said it was a "disappointing survey that increases concerns that the UK economy has lost momentum and that the first-quarter GDP weakness was not just due to the severe weather".
"This will fuel caution at the Bank of England and makes a May interest rate hike increasingly unlikely."
The Markit/CIPS manufacturing purchasing managers' index fell to 53.9 from 54.9 in March, missing expectations for a reading of 54.8 but still above the 50 mark that separates contraction from expansion.
The disappointing manufacturing reading comes just days after first-quarter GDP figures revealed that the UK economy practically ground to a halt in the first three months of 2018.
Barclays' economist Fabrice Montagne said: "Although not outright weak, manufacturing is an increasing source of concern against a backdrop of construction recession and near service stagnation. April's manufacturing PMI and components have fallen to multi-month lows with weakness in employment and the consumer sector standing out.
"As the Bank traditionally places significant importance on surveys and sentiment, the market could take today’s print as confirmation that a hike at the May MPC is now off the table."
Meanwhile, figures from the Bank of England revealed that consumer borrowing slumped in March. Net lending to consumers dropped to £0.3bn from £1.7bn the month before. The figure for March was a fifth of the £1.5bn six-month average. The month-on-month increase was just 0.1% compared with 0.8% in February and 0.6% in January.
The BoE figures also showed companies reining in their borrowing. Net finance raised by non-financial companies was zero in March compared with £2.6bn in February and a six-month average of £1.4bn.
Investors were also digesting news that US President Donald Trump has given the EU, Canada, Mexico and other allies another 30-day reprieve from new steel and aluminium tariffs. The exemptions will now last until 1 June, giving the US and the exempted nations more time to work out deals.
In corporate news, online takeaway food specialist Just Eat was the standout gainer as it said revenues rose 49% in the first quarter, fuelled by the recent acquisition of HungryHouse as it looks to outrun competition from Deliveroo and UberEats.
Broker Numis was impressed with numbers beat the City analysts consensus and management reiterated their confidence in hitting full year targets. "The materially higher growth in revenue reflects the increase in average commission rates across the group and in the UK, the benefit from charging a universal 'service charge' that has replaced levies on debt and credit card transactions," analyst Richard Stuber said.
Oil giant BP rose after posting a 71% jump in profit for the first three months of 2018 as its upstream business reported its strongest quarter for more than three years.
Challenger bank Virgin Money racked up impressive gains after it reported a jump in first-quarter mortgage balances, deposit balances and credit card balances.
Water company Severn Trent was boosted by an upgrade from Credit Suisse, along with peer United Utilities, to 'outperform'. “The tide is turning” for UK water utilities, analysts said, foreseeing "limited public support" for Labour's plan to renationalise the industry given the prohibitive cost.
Ocado was up as fresh industry data showed it was the fastest growing company in the grocery market in recent weeks. Peel Hunt also lifted its price target on Ocado and reiterated its 'buy' rating.
The supermarket sector data from Kantar Worldpanel and Nieslen showed Sainsbury's and Asda continued to lose ground to their supermarket rivals, explaining baldly why the pair had announced a proposed merger a day earlier. Sainsbury's shares were up, with BoA Merrill Lynch issuing a 'buy' rating on the view that the Asda deal "will erode the long-term discount Sainsbury has faced versus the market as it is taken more seriously as a competitor willing to take action for survival".
Shares in Tesco and Morrison were down in spite of the report showing they both held onto their market share in the face of the continued assault of the discounters Aldi and Lidl. Marks & Spencer shares fell as Nielsen's numbers showed food sales fell 0.9%. Morrison was downgraded by BoA Merrill Lynch to “neutral” as heightened sector competition is expected to limit potential cash returns.
British American Tobacco was bottom of the list after being cut to 'neutral' from 'overweight' at Piper Jaffray, while CMC Markets was under pressure after Morgan Stanley downgraded the stock to 'equalweight' from 'overweight'.
Intu Properties was cut to 'underperform' from 'outperform' by Exane and Tullow Oil was downgraded to 'sector perform' from 'outperform' at RBC Capital Markets. On the upside, Compass was lifted by an upgrade to 'buy' from 'hold'.
Market Movers
FTSE 100 (UKX) 7,520.36 0.15%
FTSE 250 (MCX) 20,348.32 0.31%
techMARK (TASX) 3,470.88 0.69%
FTSE 100 - Risers
Just Eat (JE.) 806.40p 4.08%
Bunzl (BNZL) 2,179.00p 3.22%
Severn Trent (SVT) 1,983.50p 2.53%
AstraZeneca (AZN) 5,213.00p 2.16%
BP (BP.) 547.70p 1.80%
Sainsbury (J) (SBRY) 314.50p 1.78%
International Consolidated Airlines Group SA (CDI) (IAG) 641.20p 1.75%
WPP (WPP) 1,268.00p 1.64%
Mediclinic International (MDC) 682.00p 1.64%
Rentokil Initial (RTO) 312.00p 1.63%
FTSE 100 - Fallers
British American Tobacco (BATS) 3,900.00p -2.48%
Kingfisher (KGF) 296.30p -2.47%
Fresnillo (FRES) 1,241.50p -2.35%
BT Group (BT.A) 245.00p -1.78%
BHP Billiton (BLT) 1,518.80p -1.63%
Reckitt Benckiser Group (RB.) 5,628.00p -1.39%
Antofagasta (ANTO) 959.20p -1.36%
Morrison (Wm) Supermarkets (MRW) 239.80p -1.36%
Evraz (EVR) 452.60p -1.22%
Hargreaves Lansdown (HL.) 1,768.00p -1.20%
FTSE 250 - Risers
Virgin Money Holdings (UK) (VM.) 296.70p 6.46%
Spectris (SXS) 2,809.00p 4.42%
Ocado Group (OCDO) 555.40p 3.16%
Senior (SNR) 304.40p 3.05%
On The Beach Group (OTB) 630.00p 2.94%
IP Group (IPO) 138.20p 2.84%
Aveva Group (AVV) 2,214.00p 2.79%
Cobham (COB) 118.10p 2.61%
Thomas Cook Group (TCG) 126.70p 2.51%
Hikma Pharmaceuticals (HIK) 1,319.50p 2.45%
FTSE 250 - Fallers
Charter Court Financial Services Group (CCFS) 288.45p -8.31%
Centamin (DI) (CEY) 149.60p -4.56%
Ferrexpo (FXPO) 225.00p -4.30%
Contour Global (GLO) 244.00p -3.94%
Inmarsat (ISAT) 361.80p -3.80%
B&M European Value Retail S.A. (DI) (BME) 390.10p -3.75%
TBC Bank Group (TBCG) 1,782.00p -3.16%
TI Fluid Systems (TIFS) 256.00p -3.03%
Kaz Minerals (KAZ) 895.40p -2.72%
Polymetal International (POLY) 709.80p -2.69%