London close: FTSE gains held back as Glencore and banks weigh

London stocks had a productive Tuesday as investors set aside their worries about a trade war, although heavy losses for Glencore and a banking wobble kept a cap on gains.

The FTSE 100 finished up 0.6% at 7,593.29, while the pound was 0.2% higher versus the dollar at 1.3166, having earlier been up 0.4% on the back of the latest construction survey from IHS Markit pointed to an unexpected improvement last month.

The construction purchasing managers' index rose to 53.1 in June from 52.5 the month before, hitting its highest level in seven months and beating expectations for an unchanged reading.

Indicating positive signs for coming months, the survey revealed the strongest rise in new orders in 13 months and the largest upturn in input buying for two-and-a-half years as new projects started and some forward buying to mitigate anticipated forthcoming price rises.

Howard Archer, chief economic advisor to the EY Item Club, said: "The June purchasing managers’ survey lifts hopes that the construction sector is finally gaining momentum after a difficult first quarter, which appears to have been only partly due to the severe weather."

Although it was trading higher, London's top-flight index sightly underperformed its peers in Europe, with indices there up from 0.7% in France and 0.9% in Germany to 1.6% in Italy. The FTSE 100 was held back by a slightly stronger pound, amid louder political squabbling over plans for Brexit.

Another weight around the FTSE's neck was a sharp drop in the Glencore share price, after the Swiss-headquartered commodities giant revealed it has been subpoenaed by the US Department of Justice under the Foreign Corrupt Practices Act and US money laundering laws. The DoJ wants documents and other records relating to its business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present.

Analysts at RBC Capital Markets said that, with not much detail in the company's RNS announcement to understand exactly what the investigation holds, the fact that the subpoena covers multiple countries indicates that "there is a relatively thorough investigation at hand".

Markets in Europe, meanwhile, were underpinned by news that German Chancellor Angela Merkel has secured a border deal to prevent her coalition from collapsing.

Despite the upbeat tone in markets, escalating trade tensions remained in focus, particularly after it emerged that the Trump administration has recommended to the Federal Communications Commission that China Mobile not be allowed to enter the US telecommunications market for reasons of national security.

Analyst Mike van Dulken at Accendo Markets, said: "This understandably adds to fears of a US-China trade war stepping up another level (£34bn US tariffs on Chinese goods due Friday), putting at risk the rare occurrence of synchronised global growth."

In other corporate news, healthcare services provider UDG Healthcare rose as it agreed to buy two US-based businesses - Create NYC and SmartAnalyst - for a combined consideration of up to $82.4m.

Paragon Banking surged as it announced the acquisition of residential development finance provider Titlestone Property Finance for around £48m and a portfolio of development finance loans for approximately £226m.

Banks slipped following reports they could face billions more in claims after a new PPI ruling against Paragon Personal Finance, with Lloyds and RBS both lower.

St Modwen Properties advanced after posting a drop in interim pre-tax profit but reiterating its expectations for the full year.

Tobacco companies Imperial Brands and BAT were both higher despite the Office for National Statistics unveiling a 17% fall in the number of smokers since 2014. Since 2014 there has been a 49% increase in the number of users of e-cigarettes in the UK - with 2.8m people now classified as ‘current’ vapers.

Ryanair flew higher after the budget airline said traffic grew 7% in June to 12.6m customers, but Wizz Air was in the red after saying its passenger numbers were p 21.8% in June.

Larger rival IAG, the parent company of British Airways and Iberia, topped the FTSE 100 leaderboard after Credit Suisse upped its price target to 895p from 721p.

In other broker note action, Hastings and Playtech were under the cosh after downgrades at JPMorgan and Morgan Stanley, respectively.

Market Movers

FTSE 100 (UKX) 7,593.29 0.60%
FTSE 250 (MCX) 20,665.22 0.29%
techMARK (TASX) 3,512.62 0.51%

FTSE 100 - Risers

BT Group (BT.A) 223.00p 2.84%
British American Tobacco (BATS) 3,910.00p 2.36%
Evraz (EVR) 503.00p 2.28%
Severn Trent (SVT) 2,018.00p 2.13%
Just Eat (JE.) 787.20p 2.07%
Fresnillo (FRES) 1,138.00p 2.06%
Randgold Resources Ltd. (RRS) 5,850.00p 2.06%
Paddy Power Betfair (PPB) 8,220.00p 1.92%
National Grid (NG.) 857.80p 1.90%
Vodafone Group (VOD) 185.70p 1.84%

FTSE 100 - Fallers

Glencore (GLEN) 321.00p -8.10%
Micro Focus International (MCRO) 1,235.50p -8.04%
RSA Insurance Group (RSA) 656.40p -3.19%
Burberry Group (BRBY) 2,091.00p -2.65%
Royal Bank of Scotland Group (RBS) 249.20p -1.31%
Smith & Nephew (SN.) 1,329.50p -0.89%
Royal Mail (RMG) 494.00p -0.82%
Barratt Developments (BDEV) 496.90p -0.56%
Carnival (CCL) 4,271.00p -0.51%
Lloyds Banking Group (LLOY) 62.01p -0.48%

FTSE 250 - Risers

Paragon Banking Group (PAG) 510.00p 8.42%
888 Holdings (888) 272.60p 3.26%
Homeserve (HSV) 917.00p 2.80%
OneSavings Bank (OSB) 420.80p 2.78%
Premier Oil (PMO) 122.10p 2.78%
Merlin Entertainments (MERL) 400.00p 2.56%
Pershing Square Holdings Ltd NPV (PSH) 1,130.00p 2.54%
Hochschild Mining (HOC) 185.25p 2.35%
Hikma Pharmaceuticals (HIK) 1,461.50p 2.34%
Fidelity European Values (FEV) 224.00p 2.27%

FTSE 250 - Fallers

Hastings Group Holdings (HSTG) 236.80p -6.11%
Inmarsat (ISAT) 510.60p -6.06%
St. Modwen Properties (SMP) 404.00p -3.99%
Softcat (SCT) 738.00p -3.28%
Alfa Financial Software Holdings (ALFA) 170.40p -3.18%
Vietnam Enterprise Investments (DI) (VEIL) 404.00p -2.88%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 311.10p -2.82%
AA (AA.) 121.85p -2.40%
Convatec Group (CTEC) 200.80p -2.39%
Petrofac Ltd. (PFC) 567.60p -2.37%