London midday: Stocks pare gains as manufacturing data misses forecast
London stocks had flattened out by midday on Thursday, giving back small gains as data showed that growth in the UK manufacturing sector unexpectedly slowed last month.
The FTSE 100 was steady at 7,530.97, while the pound pared gains just a touch to trade 0.2% higher versus the dollar at 1.4225 and 0.1% firmer against the euro at 1.1447 after figures revealed a slowdown in manufacturing growth due to weaker domestic demand, though the strong global economy continued to support the sector.
The manufacturing purchasing managers' index from IHS Markit and CIPS fell to 55.3 in January from 56.2 in December, below the consensus forecast of 56.5. The PMI survey indicated industrial production rising at a solid quarterly rate of around 0.6% in January.
This was the index's lowest reading since June last year and the second decline since November’s four-year high, with the forward-looking new orders index also slipped to a seven-month low.
On the upside, January's seasonally adjusted PMI was still well above its long-run average of 51.7, with manufacturing companies reporting higher production from continued rising new orders, albeit the growth was the slowest in seven months.
Economist Ruth Gregory at Capital Economics said: "The fall in the UK manufacturing PMI in January suggests that growth has slowed a little at the start of the year. But the big picture is that the sector is still performing well by recent standards."
She was reassured that strong global demand and sterling’s post-referendum fall still seemed to be providing ample support for manufacturers.
"On the basis of past form, the output balance suggests that growth in the latter is still running at a little below 1%, not far below Q4’s strong 1.3% quarterly rise. Other survey evidence, such as the CBI Industrial Trends Survey, has been pretty upbeat recently too. All in all, then, the figures haven’t changed our view that the manufacturing sector should continue to provide strong support to GDP growth, helping to offset the slowdown in the consumer services sector."
Earlier, the latest survey from Nationwide showed British house prices grew more than expected in January. Prices were up 3.2% on an annual basis compared to a 2.6% jump in December and beating expectations for a 2.5% increase.
On the month, house prices were up 0.6%, in line with December but ahead of expectations for a 0.2% rise.
In corporate news, 3i Group racked up the strongest gains as its net asset value per share of 701p for the nine months to the end of December beat analysts’ expectations.
Unilever edged up after hitting its full-year growth targets following a strong fourth quarter where sales accelerated in the final quarter of the year thanks to volume growth.
Nex Group surged after saying that changes to the US tax system will see its effective tax rate drop to between 22% and 24% next year from 26% to 28% and posting a 3% rise in third-quarter revenue.
Engineer GKN was in the black as it urged shareholders to reject Melrose Industries’ “derisory” offer, after the turnaround specialist outlined the formal terms of its £7.4bn bid, promising to simplify and declutter the business.
Cranswick was also higher as it said both total and like-for-like revenue in the third quarter were up on the previous year.
On the downside, oil giant Shell gushed lower despite better-than-expected fourth-quarter earnings, while Vodafone was in the red as it said it was on track to meet forecasts for annual profit after trading in line with expectations for the third quarter.
RPC Group retreated even as it reported a 31% jump in third-quarter revenue, while building materials supplier SIG was under pressure after saying its 2016 profit was overstated after a whistleblower revealed irregularities in its accounts.
In broker note action, Relx was hit by a downgrade from Exane BNP Paribas, while Inchcape was lower as Barclays initiated coverage of the stock at ‘underweight’.
Thomas Cook was knocked lower by a downgrade from Stifel, but Superdry gained on the back of an initiation at ‘overweight’ by JPMorgan.
Market Movers
FTSE 100 (UKX) 7,530.97 -0.03%
FTSE 250 (MCX) 20,294.39 0.25%
techMARK (TASX) 3,411.67 -0.47%
FTSE 100 - Risers
3i Group (III) 956.20p 2.66%
Evraz (EVR) 381.00p 2.50%
ITV (ITV) 170.07p 1.84%
London Stock Exchange Group (LSE) 3,995.00p 1.73%
Smurfit Kappa Group (SKG) 2,514.00p 1.70%
St James's Place (STJ) 1,208.00p 1.64%
Carnival (CCL) 5,050.00p 1.61%
Just Eat (JE.) 826.80p 1.42%
Hargreaves Lansdown (HL.) 1,883.50p 1.40%
Kingfisher (KGF) 351.70p 1.35%
FTSE 100 - Fallers
Relx plc (REL) 1,504.00p -3.47%
Vodafone Group (VOD) 216.95p -3.41%
NMC Health (NMC) 3,284.00p -1.62%
Royal Dutch Shell 'B' (RDSB) 2,459.57p -1.46%
Royal Dutch Shell 'A' (RDSA) 2,430.50p -1.30%
Admiral Group (ADM) 1,825.50p -1.22%
Shire Plc (SHP) 3,290.50p -1.11%
Randgold Resources Ltd. (RRS) 7,012.00p -1.04%
Micro Focus International (MCRO) 2,128.00p -1.02%
Informa (INF) 690.80p -0.78%
FTSE 250 - Risers
Nex Group (NXG) 648.00p 9.27%
Ocado Group (OCDO) 522.60p 3.77%
Cranswick (CWK) 3,046.00p 3.68%
Dunelm Group (DNLM) 662.50p 3.52%
CLS Holdings (CLI) 243.00p 3.18%
Wizz Air Holdings (WIZZ) 3,570.00p 3.09%
William Hill (WMH) 319.10p 2.94%
Ferrexpo (FXPO) 300.10p 2.88%
Hunting (HTG) 629.50p 2.69%
TalkTalk Telecom Group (TALK) 121.95p 2.48%
FTSE 250 - Fallers
Vectura Group (VEC) 90.90p -6.58%
SIG (SHI) 152.30p -6.33%
Mitie Group (MTO) 166.83p -5.85%
Capita (CPI) 173.20p -5.10%
RPC Group (RPC) 808.20p -5.03%
Dechra Pharmaceuticals (DPH) 2,322.00p -3.25%
Cobham (COB) 127.05p -2.83%
Victrex plc (VCT) 2,480.00p -2.82%
Aggreko (AGK) 786.60p -2.48%
Thomas Cook Group (TCG) 123.32p -2.28%