London midday: FTSE climbs as pound dented by inflation data

London stocks continued to rise on Tuesday as sabre-rattling between the US and North Korea returned to background noise, while the pound slipped as inflation proved less than expected.

Just after midday, the FTSE 100 had added close to 43 points or 0.58% to 7,396.68.

Early forays higher were accelerated as the pound dropped, falling to just above 1.2900 against the dollar before a slight rebound, and down 0.44% against the euro to 1.0956, near a new seven-year lows as German GDP growth also disappointed.

This was sparked by the Office of National Statistics publication of consumer price index data that showed a 2.6% rise for July, the same as June but lower than the 2.7% the market was expecting.

"More importantly, it’s a decent way away from the 2.9% reading seen in May. And given that the Bank of England didn’t pull the rate hike trigger at that level, they’re not going to do it for anything lower, helping to explain why the pound found itself in such a bad mood once the figure was released," said analyst Conor Campbell at Spreadex.

Another big domestic focus is on the government's Brexit plans, with a new position paper due to be published on Tuesday morning and widely covered in media reports overnight.

Brexit secretary David Davis is expected to announce plans for the present customs arrangements with the European Union to stay in place for an “interim period” that could last for up to three years in a bid to ensure that goods move smoothly across the border with the rest of the EU.

"There was little to no uplift so far from the proposal for Britain to have a customs union with the EU for some years after the official Brexit date in 2019," said Neil Wilson at ETX Capital.

"The market is treating anything from London with due caution, rightly so given the open splits in the cabinet and precarious tenure of Theresa May."

The positive mood in London comes as tensions in the Korean peninsula are felt to be tapering off, noted analyst Michael Hewson at CMC Markets.

"Tension does appear to have come down a notch or two helped in some part by more clarity on the US side in saying that they weren’t looking to a policy on regime change in North Korea, but also by China as they surprisingly agreed to ban imports of North Korean iron, lead and coal as part of the new UN sanctions regime, thus increasing the pressure on the rogue state to ease back on its aggressive stance towards the US."

Rebecca O'Keeffe, head of investment at Interactive Investor, said the ease with which equity markets have shrugged off last week’s woes was "reassuring, but also a little bit frightening".

"Reassuring in that it confirms there is a wave of liquidity willing and actively looking for buying opportunities on any dips. Frightening in that markets appear to be utterly invincible to any threat, despite potentially stretched valuations," she said.

"It looked like the market was at a tipping point last week, but the robust rally over the past two days suggests that there are still plenty of investors who think otherwise. Trying to call the top of this market has been a fool’s errand over the past few months and the weight of money supporting the market doesn’t show any sign of abating."

On the economic calendar for later in the day, US retail sales figures for July were scheduled for release at 1330 BST, alongside the Federal Reserve bank of New York's regional manufacturing gauge.

In company news, Standard Life Aberdeen was up the top of the leaderboard for the second day after its merger was completed.

Shire was higher as it announced the application for Europe-wide marketing of its lifitegrast dry-eye disease drug has been approved by the UK. "If approved, lifitegrast would be the first and only treatment in a new class of drugs to address the signs and symptoms of dry eye disease in adults in Europe," the company said.

Financial services firm Hargreaves Lansdown saw its shares fall despite confirming it had "sufficiently strong financial, liquidity and capital positions" and pledged to operate a "sustainable and progressive ordinary dividend policy" with special dividends in future years when sufficient excess cash and capital is available.

Gold miners like Randgold, Fresnillo and Acacia were in the red as gold headed for a second day of losses but found some support at $1,273, close to levels it ran into difficulty around a couple of weeks ago.

"Assuming we don’t see another flare up in the war of words between the two countries – or worse – then Gold could remain under pressure in the days ahead, although traders are understandably cautious still," said analyst Craig Erlam at Oanda.

Next was lower after Berenberg downgraded its recommendation following the recent rally in the clothing retailers's shares, telling clients there was now "material downside" following the company's weather-driven second quarter beat.

Market Movers

FTSE 100 (UKX) 7,386.85 0.45%
FTSE 250 (MCX) 19,709.81 0.09%
techMARK (TASX) 3,396.46 0.53%

FTSE 100 - Risers

Standard Life Aberdeen (SLA) 428.70p 4.36%
CRH (CRH) 2,719.00p 2.26%
BAE Systems (BA.) 593.50p 2.24%
Old Mutual (OML) 201.70p 2.13%
Shire Plc (SHP) 3,862.00p 1.82%
SEGRO (SGRO) 540.00p 1.50%
Diageo (DGE) 2,537.50p 1.50%
Paddy Power Betfair (PPB) 7,480.00p 1.49%
Tesco (TSCO) 178.65p 1.36%
Smurfit Kappa Group (SKG) 2,298.00p 1.32%

FTSE 100 - Fallers

Provident Financial (PFG) 1,867.00p -4.55%
Next (NXT) 4,197.00p -4.51%
Randgold Resources Ltd. (RRS) 7,320.00p -1.55%
Fresnillo (FRES) 1,529.00p -1.16%
Direct Line Insurance Group (DLG) 394.20p -1.03%
BHP Billiton (BLT) 1,347.50p -0.99%
United Utilities Group (UU.) 919.50p -0.97%
Burberry Group (BRBY) 1,733.00p -0.80%
Taylor Wimpey (TW.) 189.90p -0.78%
Rio Tinto (RIO) 3,387.50p -0.75%

FTSE 250 - Risers

Kaz Minerals (KAZ) 685.00p 2.47%
Ascential (ASCL) 362.80p 2.40%
UDG Healthcare Public Limited Company (UDG) 823.50p 2.36%
IP Group (IPO) 147.90p 2.21%
Diploma (DPLM) 1,066.00p 2.11%
Pershing Square Holdings Ltd NPV (PSH) 1,106.00p 1.94%
Wizz Air Holdings (WIZZ) 2,847.00p 1.61%
Sports Direct International (SPD) 418.80p 1.50%
Dignity (DTY) 2,400.00p 1.48%
Coats Group (COA) 73.90p 1.37%

FTSE 250 - Fallers

Acacia Mining (ACA) 182.40p -5.83%
Petrofac Ltd. (PFC) 420.50p -4.43%
Nostrum Oil & Gas (NOG) 394.00p -3.81%
Sirius Minerals (SXX) 26.75p -3.78%
CLS Holdings (CLI) 208.10p -2.62%
Tullow Oil (TLW) 158.90p -2.46%
Wood Group (John) (WG.) 589.50p -1.91%
Carillion (CLLN) 53.85p -1.82%
Polymetal International (POLY) 924.50p -1.75%
Centamin (DI) (CEY) 154.60p -1.72%