London midday: Stocks drop as pound gains versus dollar, miners retreat
London stocks were in the red at midday on Tuesday following a steady start, as weakness in the mining sector, a worse-than-expected reading on UK manufacturing and a stronger pound weighed on the top-flight index.
The FTSE 100 was down 0.5% at 7,654.05, retreating from last week, when the index ended the year at a record high of 7,687.77. At the same time, the pound was up 0.3% against the dollar at 1.3545 and 0.1% lower versus the euro at 1.1226 as the single currency was lifted by news that the eurozone manufacturing sector ended 2017 with record growth.
London's heavily-weighted miners were among the worst performers despite upbeat manufacturing data from China, as the sector gave back some gains after a strong rally at the end of last year. The FTSE 350 mining index was down 0.8% at 18,563.69, even as China’s Caixin manufacturing PMI came in ahead of expectations of 50.6 at 51.7 in December, up from 50.8 the month before.
Meanwhile, data released earlier showed that growth in the UK manufacturing sector slowed more than expected in December.
The IHS/Markit CIPS manufacturing purchasing mangers’ index fell to 56.3 last month from a 51-month high of 58.2 in November, missing expectations for a much smaller drop to 58.0.
Still, the average reading of 57.0 over the final quarter of 2017 was the best since the second quarter of 2014.
Although December saw rates of expansion in output, new orders and employment slow from November’s highs, growth in all three remained solid and well above long-run trends.
IG analyst Joshua Mahony said: “Sterling strength has been the undoing of the FTSE 100 this morning, as three-month highs in GBPUSD prove detrimental to the highly international index. This FTSE weakness comes amid a decline in UK listed miners, which have failed to push onwards despite the recent ascent in commodity prices. Interestingly, the strength we have seen in sterling comes despite a sharp downturn in the UK manufacturing PMI, which failed to sustain the November gains, falling back to the October reading of 86.3.
“The deterioration in today’s UK manufacturing PMI, coupled with expectations of lower growth in 2018 has clearly been overshadowed by the deterioration in the US dollar, coupled with expectations that the BoE could raise rates yet again should inflation recede.”
In corporate news, Marks & Spencer was in the red after confirming the sale and franchise of its retail business in Hong Kong and Macau to its long-established franchise partner Al-Futtaim.
BP gushed lower after saying it expects changes to US tax rates to trigger a charge of about $1.5bn (£1.1bn) before benefiting the company in the long run. The oil company said lower corporate taxes under President Trump's plan require it to revalue its deferred tax assets and liabilities. BP expects the $1.5bn one-off cash charge to affect its fourth-quarter income statement.
Compass Group fell as it confirmed the death of its chief executive, Richard Cousins, and his family in a plane accident over the weekend, and said it has moved forward the date of his succession. The appointment of the catering group's European chief operating officer, Dominic Blakemore, as chief executive was moved forward to 1 January from 1 April.
BBA Aviation was on the back foot as it ended a seven-month search for a new chief executive by appointing internal candidate Mark Johnstone to run the company.
British Airways and Iberia owner IAG flew higher as it swooped to buy assets and invest in Niki, a former part of the collapsed Air Berlin group. IAG's Spanish budget arm, Vueling, will buy €20m of assets from the Austrian airline and provide up to €16.5m of liquidity to Niki, which will form part of a new, separately run Austrian subsidiary.
BT racked up healthy gains after an upgrade to ‘buy’ from Bank of America Merrill Lynch, while ASOS edged higher after being raised to ‘buy’ from ‘hold’ at Deutsche Bank and GVC Holdings was boosted by an initiation at ‘overweight’ from Barclays. However, Carpetright slumped as it was cut to ‘hold’ from ‘buy’ at Deutsche Bank.
FTSE 100 - Risers
Centrica (CNA) 139.60p 1.68%
International Consolidated Airlines Group SA (CDI) (IAG) 660.80p 1.51%
Kingfisher (KGF) 342.60p 1.45%
Paddy Power Betfair (PPB) 8,915.00p 1.02%
Anglo American (AAL) 1,563.60p 0.91%
BT Group (BT.A) 273.93p 0.82%
easyJet (EZJ) 1,476.00p 0.82%
TUI AG Reg Shs (DI) (TUI) 1,552.00p 0.78%
Taylor Wimpey (TW.) 207.85p 0.70%
Barratt Developments (BDEV) 652.00p 0.69%
FTSE 100 - Fallers
Standard Life Aberdeen (SLA) 426.30p -2.36%
Admiral Group (ADM) 1,957.50p -2.22%
G4S (GFS) 261.40p -2.10%
Worldpay Group (WPG) 418.40p -1.78%
Antofagasta (ANTO) 988.60p -1.63%
Micro Focus International (MCRO) 2,483.00p -1.59%
RSA Insurance Group (RSA) 623.00p -1.50%
GKN (GKN) 314.80p -1.44%
Morrison (Wm) Supermarkets (MRW) 216.80p -1.41%
Rentokil Initial (RTO) 313.60p -1.38%
FTSE 250 - Risers
Go-Ahead Group (GOG) 1,530.00p 2.75%
AA (AA.) 174.45p 2.62%
Ultra Electronics Holdings (ULE) 1,382.00p 2.60%
Stagecoach Group (SGC) 168.50p 2.31%
Ferrexpo (FXPO) 298.90p 1.98%
GVC Holdings (GVC) 943.00p 1.95%
ZPG Plc (ZPG) 335.60p 1.51%
Playtech (PTEC) 872.60p 1.41%
Greene King (GNK) 562.80p 1.41%
Rank Group (RNK) 244.75p 1.35%
FTSE 250 - Fallers
TBC Bank Group (TBCG) 1,694.00p -3.20%
RHI Magnesita N.V. (DI) (RHIM) 3,798.00p -2.74%
Hikma Pharmaceuticals (HIK) 1,104.50p -2.60%
FirstGroup (FGP) 107.80p -2.44%
Just Group (JUST) 166.70p -2.17%
Marshalls (MSLH) 445.19p -2.13%
Dechra Pharmaceuticals (DPH) 2,052.00p -2.10%
RPC Group (RPC) 863.20p -2.08%
Aggreko (AGK) 783.00p -2.00%
Fisher (James) & Sons (FSJ) 1,534.00p -1.98%