London midday: Stocks extend losses as construction data disappoints, BT weighs
London stocks were weaker by midday on Friday, led lower by uninspiring earnings from BT and a disappointing reading on the UK construction sector, as investors eyed the release of the latest US non-farm payrolls report.
The FTSE 100 was off 0.4% to 7,460.52, extending earlier losses even as the pound slipped further, trading down 0.3% against the dollar at 1.4242 and 0.2% versus the euro at 1.1383. A weaker pound usually helps to prop up the top-flight index, as around 70% of its constituents derive most of their earnings from overseas.
Data out earlier showed the UK’s construction industry was “teetering on the edge” of contraction last month amid the collapse of Carillion and as Brexit and the surrounding political uncertainty curtailed investment.
The IHS Markit/CIPS UK Construction headline PMI for January was 50.2, down from 52.2 in December and marking a four-month low. It was also well below the consensus estimate of 52.0. Residential building activity slipped into decline, while overall, total industry activity barely rose.
Pantheon Macroeconomics said the collapse of Carillion, which operates in the commercial and public sectors, could not explain why the PMI fell in January.
“Although the PMI remained slightly above the 50-mark that in theory should separate expansion from contraction, all readings below 52 have signalled declining output in practice. Housebuilding was the weakest sub-component; the housing activity index fell below 50 for the first time since August 2016. By contrast, the commercial and civil engineering balances both edged above 50,” the economists said.
Market participants were still looking ahead to the non-farm payrolls report at 1330 GMT, along with the unemployment rate and average hourly earnings, while the Michigan consumer sentiment index is at 1500 GMT.
The payrolls report is expected to show an improvement on a disappointing December report of 148,000, with a rise to 180,000 last month, while average hourly earnings are expected to have risen 2.6% on the year in January.
In corporate news, BT shares fell as it said third quarter revenues declined 3% to £5.9bn and adjusted earnings were 2% lower to £1.8bn, reflecting investment in mobile devices and customer experience, along with higher business rates and pension costs, partly offset by cost savings.
AstraZeneca was in the red as investors weighed up news of a US legal dispute with Array BioPharma against its full-year results. After a good fourth quarter, total revenue was down 2% last year and core earnings per share down just 1% after the group a year ago warned of a potential fall in the mid-teens.
Cobham slumped after saying it has entered a conditional agreement to divest its AvComm and Wireless test and measurement businesses to Viavi Solutions for $455m in cash (around £325m).
National Grid ticked down as it said that US tax changes were “significantly positive” for its US customers and economically neutral for the company itself.
FTSE 250 engineering group Meggitt edged up after receiving a $26m contract to provide thermal management systems to General Dynamics Land Systems for its main battle tank, the M1 Abrams.
Provident Financial advanced as it made Malcolm Le May its permanent chief executive, with the banking veteran having last year been appointed executive chairman on temporary basis. Since its trading statement last month, it added that the doorstep lending business has made "further operational progress" and that discussions were continuing with regulators the Vanquis Bank and Moneybarn investigations.
Oil industry engineer Wood Group rallied as it said it would book a one-off full year non-cash credit as a result of recent US tax changes, while Vedanta Resources gained a little ground after it said that earnings and revenue in the third quarter rose.
Mediclinic was in the black after Barclays reinstated coverage of the stock at ‘overweight’, while NMC Health also rose as Barclays rated the stock a new ‘overweight’. DS Smith was boosted by an upgrade to ‘hold’ at Goodbody Stockbrokers, while Mondi was up after an upgrade to ‘buy’ at the same outfit. This in turn helped to underpin Smurfit Kappa.
Britvic was upgraded to ‘overweight’ at JPMorgan, while Capita was upgraded to ‘equalweight’ at Morgan Stanley and Auto Trader was up after an upgrade from UBS.
Royal Mail was downgraded to ‘hold’ by HSBC.
Market Movers
FTSE 100 (UKX) 7,460.52 -0.40%
FTSE 250 (MCX) 20,080.94 -0.52%
techMARK (TASX) 3,363.01 -0.85%
FTSE 100 - Risers
Smurfit Kappa Group (SKG) 2,566.00p 1.34%
Fresnillo (FRES) 1,367.00p 1.33%
Mondi (MNDI) 1,912.50p 0.98%
Admiral Group (ADM) 1,835.50p 0.55%
RSA Insurance Group (RSA) 620.60p 0.52%
Direct Line Insurance Group (DLG) 373.10p 0.46%
Royal Dutch Shell 'B' (RDSB) 2,443.50p 0.45%
Marks & Spencer Group (MKS) 302.50p 0.43%
Morrison (Wm) Supermarkets (MRW) 224.20p 0.40%
Anglo American (AAL) 1,696.00p 0.36%
FTSE 100 - Fallers
BT Group (BT.A) 242.90p -5.12%
CRH (CRH) 2,530.00p -1.75%
Old Mutual (OML) 232.90p -1.65%
Evraz (EVR) 372.90p -1.64%
Glencore (GLEN) 394.10p -1.43%
British American Tobacco (BATS) 4,756.50p -1.40%
Scottish Mortgage Inv Trust (SMT) 445.52p -1.39%
Centrica (CNA) 129.05p -1.38%
International Consolidated Airlines Group SA (CDI) (IAG) 638.40p -1.30%
Taylor Wimpey (TW.) 190.00p -1.27%
FTSE 250 - Risers
Provident Financial (PFG) 709.40p 5.88%
Aggreko (AGK) 779.00p 2.91%
Auto Trader Group (AUTO) 371.10p 2.83%
Stobart Group Ltd. (STOB) 246.71p 2.58%
Dechra Pharmaceuticals (DPH) 2,400.00p 2.56%
Ocado Group (OCDO) 530.74p 2.34%
Serco Group (SRP) 87.60p 2.28%
RPC Group (RPC) 839.40p 2.12%
Mitie Group (MTO) 168.20p 2.00%
McCarthy & Stone (MCS) 150.20p 1.83%
FTSE 250 - Fallers
Sanne Group (SNN) 704.40p -5.32%
Cobham (COB) 118.65p -4.89%
Intermediate Capital Group (ICP) 1,137.00p -3.32%
IWG (IWG) 220.90p -2.82%
Ultra Electronics Holdings (ULE) 1,423.00p -2.80%
Ferrexpo (FXPO) 287.50p -2.74%
JPMorgan Indian Investment Trust (JII) 729.54p -2.73%
Templeton Emerging Markets Inv Trust (TEM) 773.98p -2.52%
Jupiter Fund Management (JUP) 579.00p -2.33%
Dunelm Group (DNLM) 636.00p -2.15%