London close: FTSE 100 slips as pound climbs to 2017-high

London stocks finished in the red following a steady start, weighed down by a stronger pound and a worse-than-expected reading on UK manufacturing.

The FTSE 100 ended the day down 0.52% at 7,648.10, retreating from last week, when the index ended the year at a record high of 7,687.77. At the same time, the pound was up 0.55% against the US dollar to 1.3594 - its high water mark of 2017 - and 0.37% higher versus the euro at 1.1282 as traders began to reposition for the New Year.

News earlier in the day that the Eurozone manufacturing sector ended 2017 with record growth served to lift the single currency to its best level in three years against the US dollar.

Miners reversed early losses to top the leaderboard on the heels of upbeat manufacturing data out of China, adding to the sector's strong rally at the end of 2017. By the close of trade in London, the FTSE 350 mining index had climbed 1.06% to change hands at 18,916.53, after China's Caixin manufacturing PMI came in ahead of expectations of 50.6 at 51.7 in December, up from 50.8 the month before.

The continuing downdraft in the US dollar also lent a helping hand, boosting the prices of some base and precious metals.

Nevertheless, some economists cautioned that Tuesday's reading on Chinese factory sector activity might be masking underlying weakness. That sentiment was echoed by traders at Sucden Financial.

"The start to 2018 saw LME prices maintain the steady tone, helped by a weakening USD and better than forecast China manufacturing PMI data for Dec. However, only tin and zinc made another new high, trading up to 20100 and 3352 and with the complex now sending out 'overbought' signals we could see a short term correction unless fresh news propels the market higher," said Sucden Financial.

Meanwhile, data released earlier showed that growth in the UK manufacturing sector slowed more than expected in December.

The IHS/Markit CIPS manufacturing purchasing mangers' index fell to 56.3 last month from a 51-month high of 58.2 in November, missing expectations for a smaller drop to 58.0.

Still, the average reading of 57.0 over the final quarter of 2017 was the best since the second quarter of 2014.

Although December saw rates of expansion in output, new orders and employment slow from November's highs, growth in all three remained solid and well above long-run trends.

In corporate news, BT racked up healthy gains after an upgrade to 'buy' from Bank of America-Merrill Lynch, while ASOS edged higher after being raised to 'buy' from 'hold' at Deutsche Bank and GVC Holdings was boosted by an initiation at 'overweight' from Barclays.

However, Carpetright slumped as it was cut to 'hold' from 'buy' at Deutsche Bank

Marks & Spencer was also in the red after confirming the sale and franchise of its retail business in Hong Kong and Macau to its long-established franchise partner Al-Futtaim.

BP gushed lower after saying it expects changes to US tax rates to trigger a charge of about $1.5bn (£1.1bn) before benefiting the company in the long run. The oil company said lower corporate taxes under President Trump's plan require it to revalue its deferred tax assets and liabilities. BP expects the $1.5bn one-off cash charge to affect its fourth-quarter income statement.

Compass Group fell as it confirmed the death of its chief executive, Richard Cousins, and his family in a plane accident over the weekend, and said it has moved forward the date of his succession. The appointment of the catering group's European chief operating officer, Dominic Blakemore, as chief executive was moved forward to 1 January from 1 April.

BBA Aviation was on the back foot as it ended a seven-month search for a new chief executive by appointing internal candidate Mark Johnstone to run the company.

British Airways and Iberia owner IAG flew higher as it swooped-in to buy assets and invest in Niki, a former part of the collapsed Air Berlin group. IAG's Spanish budget arm, Vueling, will buy €20m of assets from the Austrian airline and provide up to €16.5m of liquidity to Niki, which will form part of a new, separately run Austrian subsidiary.

Airlines also benefitted from supportive comments out of analysts at JP Morgan.

Market Movers

FTSE 100 (UKX) 7,648.10 -0.52%
FTSE 250 (MCX) 20,681.45 -0.22%

FTSE 100 - Risers

Anglo American (AAL) 1,595.00p 2.94%
Centrica (CNA) 141.20p 2.84%
International Consolidated Airlines Group SA (CDI) (IAG) 668.80p 2.73%
easyJet (EZJ) 1,501.00p 2.53%
Kingfisher (KGF) 343.40p 1.69%
ITV (ITV) 167.80p 1.39%
BT Group (BT.A) 275.00p 1.21%
Rio Tinto (RIO) 3,988.50p 1.18%
Hargreaves Lansdown (HL.) 1,823.00p 1.17%
Glencore (GLEN) 394.20p 1.08%

FTSE 100 - Fallers

Rentokil Initial (RTO) 307.50p -3.30%
Admiral Group (ADM) 1,948.50p -2.67%
Standard Life Aberdeen (SLA) 425.40p -2.57%
Direct Line Insurance Group (DLG) 372.00p -2.54%
Experian (EXPN) 1,599.50p -2.23%
RSA Insurance Group (RSA) 619.00p -2.13%
Unilever (ULVR) 4,045.00p -1.95%
Smith & Nephew (SN.) 1,263.00p -1.94%
Worldpay Group (WPG) 418.50p -1.76%
Diageo (DGE) 2,678.00p -1.72%

FTSE 250 - Risers

Evraz (EVR) 354.70p 4.32%
Ultra Electronics Holdings (ULE) 1,399.00p 3.86%
AA (AA.) 176.55p 3.85%
Ferrexpo (FXPO) 303.00p 3.38%
Vedanta Resources (VED) 830.00p 3.17%
Rank Group (RNK) 246.00p 2.90%
Go-Ahead Group (GOG) 1,528.00p 2.62%
Fidelity China Special Situations (FCSS) 241.50p 2.55%
Greene King (GNK) 568.40p 2.41%
ZPG Plc (ZPG) 338.40p 2.36%

FTSE 250 - Fallers

Pets at Home Group (PETS) 170.60p -3.29%
Dechra Pharmaceuticals (DPH) 2,028.00p -3.24%
Just Group (JUST) 165.00p -3.11%
Diploma (DPLM) 1,209.00p -3.05%
Marshalls (MSLH) 442.00p -2.84%
Euromoney Institutional Investor (ERM) 1,268.00p -2.84%
Beazley (BEZ) 521.00p -2.53%
Greencore Group (GNC) 224.00p -2.48%
Aggreko (AGK) 779.40p -2.45%
RPC Group (RPC) 860.00p -2.44%