London midday: Stocks stay down amid trade jitters; services PMI beats forecasts

London stocks were stuck in the red at midday on Wednesday even as the pound ticked higher on the back of better-than-expected services data, with global trade concerns still weighing on investor sentiment.

The FTSE 100 was down 0.3% to 7,573.02, with volumes lighter than usual as US markets will be closed for the Independence Day holiday.

The pound was up 0.1% versus the dollar at 1.3212 and 0.3% firmer against the euro at 1.1349 after data revealed that activity in the UK dominant services industry improved much more than expected last month, suggesting the British economy grew 0.4% in the second quarter of the year and raising the chances that the Bank of England will hike interest rates in August.

The UK services purchasing managers’ index from IHS Markit/CIPS increased to 55.1 in June, the most positive growth sentiment since October and up from 54.0 in May, the level at which economists expected it to remain.

The services PMIs in the second quarter also points to quarterly growth in services output of around 0.5%, up from the first quarter’s 0.3% rate. The survey’s forward-looking balances also indicated that solid growth in the services sector should be sustained in the coming months.

Chris Williamson, chief business economist at IHS Markit, said: "The signs of the economy rebounding in the second quarter accompanied by rising price pressures will add to expectations that the Bank of England will hike interest rates at its August meeting. Yet the details of the survey hint at the need for caution.

"Of greatest concern, companies’ views on expected future growth remained worryingly downbeat. The survey responses indicate that political uncertainty, and Brexit in particular, continues to stoke nervousness about the outlook.

"The fact that current business activity growth remains resilient despite business confidence being so subdued remains one of the most positive aspects of the survey, but does little to assuage worries about the longer-term sustainability of growth, and hints at widespread caution in relation to business investment."

More broadly, trade worries persisted as the Financial Times reported that EU officials are considering talks on a tariff-cutting deal between the world's big car exporters to prevent an all-out trade war with the US.

On the corporate front, BP slipped as it entered into agreements with ConocoPhillips that will significantly increase its holding in the Clair field, a core asset of BP's North Sea business in the UK, while also selling its non-operating interest in the Kuparuk and satellite oilfields in Alaska.

Building products supplier SIG was lower after it reported a slight improvement in UK sales in the second quarter but a slowing of growth in Europe.

Compass Group slid after announcing that Johnny Thomson will step down from his role as finance director and leave the company by the end of December.

On the upside, Anglo American advanced following a report that Anil Agarwal, who owns 19.35% of the company, is preparing a plan to merge Vedanta Resources and Anglo American's South African business via a share swap.

Sainsbury’s also gained despite saying that revenue growth slowed in the first quarter as the supermarket chain cut prices to sell more items to customers.

FTSE 250 bus and rail operator National Express rose after saying that its Spanish and Moroccan division, ALSA, has been awarded a "major" bus contract worth €1bn that will see it become the largest transport operator in Morocco.

TalkTalk was a high riser as it emerged that Toscafund Asset Management lifted its stake in the company to 16.2% from 15.1%.

In broker note action, Petra Diamonds got a boost from an upgrade to 'outperform' at RBC Capital Markets, but Vesuvius was hit by a double downgrade to 'underperform' from Bank of America Merrill Lynch.

Market Movers

FTSE 100 (UKX) 7,573.02 -0.27%
FTSE 250 (MCX) 20,617.74 -0.23%
techMARK (TASX) 3,504.13 -0.24%

FTSE 100 - Risers

Anglo American (AAL) 1,698.20p 3.56%
BT Group (BT.A) 227.62p 2.07%
Sainsbury (J) (SBRY) 325.01p 2.01%
Royal Mail (RMG) 502.20p 1.66%
British American Tobacco (BATS) 3,949.00p 1.00%
WPP (WPP) 1,170.00p 0.95%
Land Securities Group (LAND) 964.40p 0.87%
British Land Company (BLND) 667.20p 0.85%
Vodafone Group (VOD) 187.38p 0.74%
ITV (ITV) 172.00p 0.64%

FTSE 100 - Fallers

Melrose Industries (MRO) 205.61p -1.76%
Compass Group (CPG) 1,594.00p -1.73%
BHP Billiton (BLT) 1,643.40p -1.59%
Rio Tinto (RIO) 3,997.00p -1.52%
Croda International (CRDA) 4,719.00p -1.48%
Pearson (PSON) 880.80p -1.43%
Antofagasta (ANTO) 956.20p -1.42%
Intertek Group (ITRK) 5,570.00p -1.42%
Johnson Matthey (JMAT) 3,510.00p -1.32%
TUI AG Reg Shs (DI) (TUI) 1,635.25p -1.28%

FTSE 250 - Risers

TalkTalk Telecom Group (TALK) 109.95p 5.01%
Telecom Plus (TEP) 1,118.00p 3.71%
Stagecoach Group (SGC) 155.20p 3.33%
Inmarsat (ISAT) 528.20p 3.29%
Quilter (QLT) 147.32p 2.62%
Sirius Minerals (SXX) 33.26p 1.84%
RDI Reit (RDI) 36.20p 1.83%
Energean Oil & Gas (ENOG) 534.00p 1.71%
Investec (INVP) 548.20p 1.59%
Hammerson (HMSO) 535.00p 1.48%

FTSE 250 - Fallers

Vesuvius (VSVS) 558.50p -5.18%
TI Fluid Systems (TIFS) 252.00p -3.08%
BCA Marketplace (BCA) 222.00p -2.84%
Ferrexpo (FXPO) 176.20p -2.71%
Ibstock (IBST) 288.20p -2.70%
Capita (CPI) 157.70p -2.65%
Senior (SNR) 295.00p -2.51%
Premier Oil (PMO) 119.30p -2.29%
Aggreko (AGK) 642.40p -2.19%
888 Holdings (888) 267.00p -2.05%