London midday: Stocks push up as pound falls below $1.37 on weak manufacturing data
London stocks had extended gains by midday on Tuesday as the pound fell below $1.37 for the first time since January on weak manufacturing data.
The FTSE 100 was up 0.5% to 7,543.81 as the pound dropped 0.6% against the dollar to 1.3685 and slipped 0.2% versus the euro to 1.1378 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 this month.
Spreadex analyst Connor Campbell said this was the latest in a long line of dovish data for the pound to try and digest.
"You have to feel a bit sorry for sterling. Back in mid-April it was riding high, hitting levels against the dollar not seen since before Brexit on the assumption that the Bank of England would be raising interest rates in May. Yet from that $1.435-crossing peak cable plunged more than 4%, closing April the wrong side of $1.38."
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.
Rob Dobson, director at IHS Markit, said: "While adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance, making the chances of a near term hike in interest rates by the Bank of England look increasingly remote. On this footing, the sector is unlikely to see any improvement on the near-stagnant performance signalled by the opening quarter’s GDP numbers."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Markit’s manufacturing survey provides more evidence that the economy has fundamentally slowed this year, strengthening the case even more for the MPC to hold back from raising interest rates later this month."
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.
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.
Morrisons was the worst performer on FTSE 100 after Bank of America Merrill Lynch downgraded its stance on the supermarket chain to 'neutral' due to competition concerns, as it reinstated coverage of Sainsbury's with a 'buy' rating following news of its tie-up plans with Asda.
British American Tobacco was under the cosh after being cut to 'neutral' from 'overweight' at Piper Jaffray and CMC Markets fell as 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, though, Compass was lifted by an upgrade to 'buy' from 'hold' at Jefferies while Ocado was in the black as Peel Hunt lifted its price target and reiterated its 'buy' rating.
Market Movers
FTSE 100 (UKX) 7,543.81 0.46%
FTSE 250 (MCX) 20,399.60 0.56%
techMARK (TASX) 3,470.67 0.68%
FTSE 100 - Risers
Just Eat (JE.) 808.40p 4.47%
United Utilities Group (UU.) 762.00p 2.53%
Halma (HLMA) 1,253.10p 2.46%
Smith (DS) (SMDS) 535.00p 2.41%
Severn Trent (SVT) 1,986.50p 2.40%
Bunzl (BNZL) 2,161.00p 2.37%
International Consolidated Airlines Group SA (CDI) (IAG) 643.60p 2.13%
Experian (EXPN) 1,702.00p 2.10%
Rentokil Initial (RTO) 313.30p 2.05%
Johnson Matthey (JMAT) 3,360.00p 2.00%
FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 238.30p -1.98%
Fresnillo (FRES) 1,258.00p -1.33%
Marks & Spencer Group (MKS) 284.24p -1.20%
British American Tobacco (BATS) 3,954.50p -1.11%
Kingfisher (KGF) 301.30p -0.82%
Glencore (GLEN) 348.00p -0.77%
BT Group (BT.A) 248.05p -0.56%
Barclays (BARC) 206.20p -0.51%
Tesco (TSCO) 234.71p -0.50%
Next (NXT) 5,234.00p -0.42%
FTSE 250 - Risers
Virgin Money Holdings (UK) (VM.) 295.80p 6.14%
Ocado Group (OCDO) 563.00p 4.57%
On The Beach Group (OTB) 635.00p 3.76%
SSP Group (SSPG) 675.53p 3.58%
Thomas Cook Group (TCG) 127.80p 3.40%
Tate & Lyle (TATE) 590.60p 2.78%
Indivior (INDV) 465.40p 2.71%
Spectris (SXS) 2,761.00p 2.64%
IG Group Holdings (IGG) 851.50p 2.59%
Euromoney Institutional Investor (ERM) 1,348.00p 2.59%
FTSE 250 - Fallers
Charter Court Financial Services Group (CCFS) 292.90p -6.90%
Ferrexpo (FXPO) 229.00p -2.59%
Coats Group (COA) 77.10p -2.53%
TBC Bank Group (TBCG) 1,794.00p -2.39%
B&M European Value Retail S.A. (DI) (BME) 396.70p -2.12%
Capita (CPI) 187.60p -2.06%
Games Workshop Group (GAW) 2,385.10p -2.05%
Centamin (DI) (CEY) 153.70p -1.95%
Inmarsat (ISAT) 368.90p -1.91%
Computacenter (CCC) 1,248.00p -1.58%