London midday: Stocks accelerate as miners climb on China stimulus

London stocks became more confident by midday as miners built on the morning's tentative start to extend gains, oil prices levelled off and the CBI delivered a better-than-expected survey on the UK's manufacturing sector.

The FTSE 100 index jumped just over 70 points or 0.9% to 7,726.21 by noon, even though sterling picked up 0.2% against the dollar to 1.3131.

In its monthly Industrial Trends survey, the CBI found the balance of manufacturing companies reporting higher orders had fallen to +11 in July from +13 in June, but not as bad as the +8 that the market had expected. Moreover, the quarterly business optimism balance edged up to -3 in Q3, from -4 in Q2, above the consensus -6.

The fall in total orders balance is "just noise" said economist Samuel Tombs at Pantheon Macroeconomics: "The recovery in the manufacturing sector remains brisk, but firms still aren’t confident enough to increase investment."

He said his seasonally adjusted version of the total orders balance actually increased slightly, reaching its highest level since December, which on past form was consistent with year-over-year growth in manufacturing output of about 4%.

Miners rather than manufacturers were the main driving force on the London Stock Market, however, thanks to news of fresh China stimulus measures to boost growth, offsetting simmering trade war fears between Beijing and Washington.

China's State Council said said it would pursue a "more proactive" fiscal policy a day after providing a record injection of funding for banks.

In an announcement posted overnight, the council said it will adopt "a combination of fiscal and financial measures in an effort to boost domestic demand and bolster support for the real economy", with the more proactive fiscal policy including a focus on introducing deeper tax cuts.

Pressure on China and its currency had forced Beijing to intervene, said analyst Mike van Dulken at Accendo Markets.

Copper prices, which have tracked the yuan lower, were also boosting the mining sector, said market analyst Connor Campbell at SpreadEx, saying the rally was on reports of stalled negotiations between workers and management at the giant Escondida mine in Chile would cause a disruption to supply.

Banks were the sector to watch on Tuesday, said van Dulken, as surging US and Japanese government bond yields were supported by expectations of monetary policy tightening. RBS led the sector, with HSBC, Barclays and Lloyds all higher. Also helping sentiment was a strong set of second-quarter figures from continental rival UBS.

Oil companies BP and Shell recovered from initial falls a Brent crude erased earlier losses to flatten off at $73.12.

Oversupply concerns have dominated market sentiment, said Jasper Lawler at London Capital Group. "The big fear for oil traders is that Saudi Arabia and other large oil producers are ramping up production ahead of the November deadline to comply with US sanctions on Iranian oil, this comes at a time when concerns over demand are starting to rise owing to increased global trade tension; over supply and falling demand is not a good combination for the oil bulls."

In other company news, fizzy drinks maker Britvic bubbled higher as it reported solid third-quarter sales growth of 3.4% despite being held back due to the UK shortage of carbon dioxide.

BT was up for a second day as the telecoms group said it has offered discounts to encourage communication providers to upgrade customers to faster broadband over the next five years. The company said the offer, made by its Openreach infrastructure arm, should bring superfast and ultrafast broadband to most homes and businesses.

ConvaTec climbed after it won clearance from the US medical regulator for its Aquacel dressing for wound management.

AstraZeneca was little moved after it agreed to sell the commercial rights to Atacand and Atacand Plus in Europe to Cheplapharm Arzneimittel for $200m on completion of the agreement, plus a time-bound payment of $10m and sales-contingent milestones. The deal is expected to complete in the third quarter.

Likewise, Glaxosmithkline as its ViiV Healthcare joint venture reported positive results from trials of two of its key HIV treatments.

Sainsbury's fell as its sales were shown to still be lagging behind its big supermarket rivals as all of the big four enjoyed their best period of growth so far this year. Data from Kantar Worldpanel showed supermarket sales expanded 3.6%, their fastest rate this year, which Kantar put down to the World Cup and prolonged hot weather.

Walmart's Asda led the Big Four, with Morrisons and Tesco both chugging along nicely. Tesco was reported by Sky News to be examining plans to challenge German discounters Aldi and Lidl with a new retail format called Jack’s. Ocado shares fell as its sales growth slowed.

Superdry shares slid as the fashion chain founder Julian Dunkerton sold a 6.7% stake for £71m.

Drax tumbled even as it reported half-year pre-tax losses of £11.3m, an improvement on the previous year's loss of £103.7m.

Spectris shares fell 7% despite half year results largely in line with expectations. Analysts were disappointed that further details of management's Uplift programme will not be forthcoming until later in the year.

In broker action, Royal Mail was lifted as HSBC upgraded the stock to 'buy' from 'hold', while ITV gained from a JP Morgan Cazenove price target upgrade. Superdry was also cut to 'hold' at Liberum and Ascential downgraded to 'neutral' at Citi.

Market Movers

FTSE 100 (UKX) 7,716.68 0.80%
FTSE 250 (MCX) 20,873.66 0.50%
techMARK (TASX) 3,592.17 0.35%

FTSE 100 - Risers

Anglo American (AAL) 1,669.00p 4.01%
BHP Billiton (BLT) 1,673.40p 3.92%
Glencore (GLEN) 321.95p 3.85%
Evraz (EVR) 542.60p 3.75%
Rio Tinto (RIO) 4,208.00p 3.56%
Royal Bank of Scotland Group (RBS) 248.80p 2.81%
Micro Focus International (MCRO) 1,282.00p 2.81%
Mondi (MNDI) 2,060.00p 2.54%
Sage Group (SGE) 645.80p 2.41%
Antofagasta (ANTO) 963.00p 2.23%

FTSE 100 - Fallers

SSE (SSE) 1,342.50p -1.47%
National Grid (NG.) 825.30p -1.44%
Ocado Group (OCDO) 1,130.50p -1.09%
Centrica (CNA) 151.65p -0.91%
Associated British Foods (ABF) 2,427.00p -0.86%
Sainsbury (J) (SBRY) 323.00p -0.65%
United Utilities Group (UU.) 716.40p -0.64%
Marks & Spencer Group (MKS) 307.70p -0.36%
Tesco (TSCO) 257.00p -0.35%
Just Eat (JE.) 876.00p -0.27%

FTSE 250 - Risers

Ferrexpo (FXPO) 180.95p 5.17%
Sophos Group (SOPH) 529.50p 4.54%
Charter Court Financial Services Group (CCFS) 358.00p 4.33%
Centamin (DI) (CEY) 123.05p 3.80%
Kaz Minerals (KAZ) 818.40p 3.62%
Britvic (BVIC) 801.50p 2.89%
Investec (INVP) 555.80p 2.74%
Convatec Group (CTEC) 210.70p 2.73%
Renewi (RWI) 71.60p 2.73%
Bank of Georgia Group (BGEO) 1,854.20p 2.57%

FTSE 250 - Fallers

Superdry (SDRY) 1,259.00p -7.77%
Just Group (JUST) 115.00p -7.56%
Drax Group (DRX) 333.60p -6.87%
Spectris (SXS) 2,441.00p -6.12%
Euromoney Institutional Investor (ERM) 1,342.00p -3.45%
Fisher (James) & Sons (FSJ) 1,840.00p -2.23%
Wetherspoon (J.D.) (JDW) 1,220.28p -2.22%
PZ Cussons (PZC) 213.20p -2.11%
FDM Group (Holdings) (FDM) 976.00p -1.81%
Telecom Plus (TEP) 1,062.00p -1.67%