London midday: Stocks maintain gains as borrowing figures digested
London stocks were holding on to gains by midday on Friday, outperforming their European peers as investors digested the latest borrowing figures and economic growth data out China.
The FTSE 100 was up 0.2% to 7,043.01, faring considerably better than its European counterparts, which were dragged lower by the latest clash between the EU and Italy.
Indices in Europe were all firmly in the red, with Italy's FTSE Mib suffering the brunt of the selling the day after the European Commission sent a letter to Rome demanding an explanation for its budget plans, which it called an "unprecedented" breach of EU fiscal rules. The news prompted a sharp rise in Italy's 10-year government bond yields, which surged to a four-year high.
IG market analyst Joshua Mahony said: "The problem is that there seems to be no impending resolution between the two sides, with the coalition feeling that they only answer to the electorate, while the EU is unwilling to budge at the risk of setting a bad precedent for the other nations.
"The fact that we have seen Italian borrowing costs rise to the highest level in over four years does little to benefit a government that wishes to ramp up borrowing in a nation with the second highest debt-to-GDP ratio in the EU."
In currency markets, the pound was up 0.2% against the dollar at 1.3044 and flat versus the euro at 1.1370 following ONS data showing that UK government borrowing fell more than expected in September, to £4.1bn from £5bn a year ago, as a big rise in tax receipts boosted expectations for the upcoming budget.
The Office for National Statistics said it was the lowest borrowing figure for September since 2007.
"The chancellor will be heartened by the 2018/19 fiscal year performance so far. It does give him some much-needed room for manoeuvre in November’s Budget as he looks to find the extra funding needed for the high-profile increased spending promised for the NHS," said Howard Archer, chief economic adviser to the EY Item Club. "Even so, it looks like he will still need to raise some taxes (or reduce tax relief in some areas) to help finance the increased NHS spending."
Chinese growth figures out earlier were also in focus as they showed that the economy slowed more than expected in the third quarter, with annualised GDP coming in at 6.5%, its weakest quarter since 2009 and below expectations of 6.6%. Still, stocks in the China rallied after regulators there stepped in with fresh measures to support liquidity and investment.
Closer to home, Brexit was still at the forefront of investors' minds after the EU said it was ready to extend the length of the post-Brexit transition if the UK wants. EU Council president Donald Tusk told reporters at the EU summit on Thursday that if the UK decides an extension would be helpful in order to reach a deal, "leaders would be ready to consider this positively".
However, May's concessions in Brussels - made without cabinet approval - were infuriating "all sections" of her party and sparking further plotting against the Prime Minister, newspapers reported.
In corporate news, shopping centre owner Intu Properties surged 11% after confirming it had received a possible offer from a consortium led by one of its senior to directors to buy the company at 210p a share. Intu's deputy chairman John Whittaker's Peel Group, which already holds around 27% of the firm, has teamed up with Saudi conglomerate Olayan Group and Canary Wharf owner Brookfield Property.
London Stock Exchange advanced after a broadly in-line third-quarter trading statement and after announcing that it was in the process of increasing its stake in LCH Group, while Man Group ticked a touch higher after it announced a new $100m share buyback.
Dechra Pharmaceuticals was on the front foot as it announced the acquisition of Brazil's Venco for BRL185m (37.8m) and it said its performance in the first quarter was in line with management's expectations, while IP Group rallied on the back of an initiation at 'buy' at Berenberg.
On the downside, EasyJet and Renishaw were sharply lower following downgrades from MainFirst and Stifel, respectively.
Equipment rental firm Ashtead was under the cosh for the second day running after US peer United Rentals' guidance disappointed on Wednesday. United Rentals shares ended down nearly 15% overnight.
InterContinental Hotels lost ground even after saying it had its best quarter for news signings and openings in a decade, as revenue per available room growth slowed. The company also announced a $500m special dividend and share consolidation.
Provident Financial was in the red after the doorstep lender said collections in its home credit business were still 10% below historic levels in the third quarter.
Safety and health group Halma slipped after saying it had bought a Belgian fire control panel maker and fire system seller, while plastics maker Essentra slid as it said like-for-like revenues were flat in the third quarter.
Market Movers
FTSE 100 (UKX) 7,043.01 0.23%
FTSE 250 (MCX) 18,826.03 -0.71%
techMARK (TASX) 3,314.68 -0.71%
FTSE 100 - Risers
Reckitt Benckiser Group (RB.) 6,679.00p 3.21%
Unilever (ULVR) 4,090.50p 2.61%
Diageo (DGE) 2,669.50p 1.71%
Tesco (TSCO) 212.35p 1.55%
National Grid (NG.) 830.90p 1.44%
United Utilities Group (UU.) 719.20p 1.44%
Centrica (CNA) 149.30p 1.43%
Royal Dutch Shell 'A' (RDSA) 2,522.00p 1.37%
SSE (SSE) 1,143.68p 1.30%
Royal Dutch Shell 'B' (RDSB) 2,563.00p 1.22%
FTSE 100 - Fallers
Ashtead Group (AHT) 1,818.00p -6.12%
easyJet (EZJ) 1,070.50p -6.10%
InterContinental Hotels Group (IHG) 4,020.00p -4.67%
NMC Health (NMC) 3,012.00p -3.95%
Smith (DS) (SMDS) 390.40p -3.34%
International Consolidated Airlines Group SA (CDI) (IAG) 559.00p -2.85%
Rentokil Initial (RTO) 304.20p -2.78%
Johnson Matthey (JMAT) 2,935.00p -2.49%
Taylor Wimpey (TW.) 153.49p -2.49%
Barratt Developments (BDEV) 502.00p -2.37%
FTSE 250 - Risers
Intu Properties (INTU) 197.13p 10.93%
Dechra Pharmaceuticals (DPH) 2,336.00p 8.15%
IP Group (IPO) 113.60p 2.71%
Energean Oil & Gas (ENOG) 614.00p 2.33%
Equiniti Group (EQN) 214.50p 2.14%
Fidelity China Special Situations (FCSS) 191.60p 1.91%
Amigo Holdings (AMGO) 229.85p 1.91%
Convatec Group (CTEC) 153.45p 1.89%
Pennon Group (PNN) 732.20p 1.75%
Rank Group (RNK) 158.80p 1.66%
FTSE 250 - Fallers
Renishaw (RSW) 3,756.00p -10.40%
Essentra (ESNT) 363.15p -5.87%
Thomas Cook Group (TCG) 39.84p -5.46%
Elementis (ELM) 208.00p -5.20%
Contour Global (GLO) 170.20p -4.92%
AA (AA.) 100.00p -4.67%
Wizz Air Holdings (WIZZ) 2,352.00p -4.31%
Vesuvius (VSVS) 535.50p -4.20%
On The Beach Group (OTB) 427.50p -3.93%
Weir Group (WEIR) 1,560.50p -3.85%