London midday: Stocks extend gains as sterling slips on construction data

London stocks had pushed further into the green by midday on Monday as sterling eased back against the dollar after the release of weak UK construction data, with sentiment underpinned by growing optimism about a trade deal between the US and China.

The FTSE 100 was 0.6% higher at 7,152.25, while the pound was flat versus the dollar at 1.3201 and 0.3% firmer against the euro at 1.1649. Sterling had been trading up against the dollar earlier as investors cheered news that Conservative party grandee Graham Brady is ready to drop his opposition to Theresa May's Brexit deal.

However, the currency lost its shine as it emerged that the IHS Markit/CIPS construction purchasing managers' index fell to 49.5 in February from 50.6 the month before, the first decline since March 2018 when the sector was hit by heavy snow storms, as concerns over Brexit saw clients put projects on hold.

Stripping out this one-off weather-related decline in output, February’s reading was the lowest since September 2017. Analysts had been looking for a reading of around 50.5.

IHS Markit/CIPS research found anecdotal evidence from survey respondents "that Brexit uncertainty had slowed decision-making on commercial projects" and had subdued client demand.

The index measuring business expectations for the year head remained positive, but the degree of confidence is now at a four-month low and is below the long-run survey average. Softer demand saw input buying fall for the first since September 2017.

David Cheetham, chief market analyst at XTB, said: "The outlook for the construction sector is rather bleak. The fall last March was attributed to unseasonably late snowfall, but this time no such excuses can be rolled out."

However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Looking ahead, we continued to expect a Brexit deal to be signed off before the summer. With profits markets high and borrowing costs still low, capex likely will rebound in the second half of this year. A 10.4%. year-over-year jump in public sector gross investment in 2019/20 will also provide a favourable tailwind.

"Accordingly, we continue to expect the construction sector to revive in the second half of this year."

The overall tone in equity markets was lifted by reports that the US and China are nearing a deal that could lift most or all US tariffs if Beijing sticks to a range of pledges such as better protection of intellectual rights and the acquisition of a significant amount of US products.

Bloomberg cited people familiar with the talks as saying that Chinese officials have made it clear that removing levies on $200bn worth of Chinese goods quickly was necessary to finalise any deal. They said one of the remaining sticking points is whether the tariffs would be lifted immediately or over a period of time.

IG market analyst Chris Beauchamp said: "Hopes that Trump and Xi will sit down later in the month to hammer out a resolution have buoyed equities, but given the outcome of last week’s US-North Korea chit-chat perhaps a more sanguine approach would make sense."

On the corporate front, Rightmove shares rose to the top of the FTSE 100, having slumped on the back of results at the end of last week. Both Barclays and Exane BNP Paribas lifted their price targets on the stock. Barclays said that while growth is slowing and the decline in UK agents could accelerate, Rightmove "remains a very high quality business in a tough market".

Melrose Industries advanced after the Sunday Times said it was trying to sell a division of GKN that makes tractor wheels as it looks to offload assets after its takeover of GKN last year.

Aviva was in the green as it promoted international insurance boss Maurice Tulloch to the role of chief executive with immediate effect.

Shares in British American Tobacco reversed earlier losses as Canada’s Court of Appeal upheld the Superior Court's decision four years ago to force the company's Canadian subsidiary to pay C$10.4bn of damages as part of a class action lawsuit.

Ted Baker also saw its stock move higher after early losses, as it said chief executive and founder, Ray Kelvin, has resigned with immediate effect following allegations of misconduct last year.

Energean Oil & Gas was a high riser as it said it commenced its 2019 Israeli drilling campaign, while Sports Direct advanced as it offered to buy Findel after upping its stake in the home shopping company to 36.8% from 29.9%.

On the downside, Synthomer slumped as its full-year earnings before interest and tax missed analysts' expectations and Rotork was sharply lower as the manufacturer of industrial flow control equipment warned that growth is expected to slow this year.

Elsewhere, Victrex was knocked lower by a downgrade to 'sell' at Citi.

Market Movers

FTSE 100 (UKX) 7,152.25 0.64%
FTSE 250 (MCX) 19,427.58 0.14%
techMARK (TASX) 3,484.16 0.13%

FTSE 100 - Risers

Rightmove (RMV) 497.30p 5.38%
NMC Health (NMC) 2,844.00p 3.27%
Melrose Industries (MRO) 182.20p 2.33%
Smurfit Kappa Group (SKG) 2,232.00p 2.20%
Informa (INF) 715.60p 1.94%
Relx plc (REL) 1,640.00p 1.83%
Aviva (AV.) 439.75p 1.79%
Ashtead Group (AHT) 2,083.00p 1.76%
Smith (DS) (SMDS) 342.90p 1.75%
Wood Group (John) (WG.) 544.00p 1.68%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 582.60p -3.38%
Rolls-Royce Holdings (RR.) 884.60p -2.25%
Fresnillo (FRES) 813.00p -1.33%
Vodafone Group (VOD) 132.72p -1.13%
CRH (CRH) 2,416.00p -0.74%
easyJet (EZJ) 1,247.50p -0.68%
Ocado Group (OCDO) 1,038.50p -0.62%
TUI AG Reg Shs (DI) (TUI) 807.00p -0.52%
Carnival (CCL) 4,247.00p -0.47%
Centrica (CNA) 123.00p -0.36%

FTSE 250 - Risers

Energean Oil & Gas (ENOG) 711.00p 5.26%
Indivior (INDV) 107.95p 4.75%
Man Group (EMG) 140.65p 4.53%
Metro Bank (MTRO) 950.00p 4.17%
Superdry (SDRY) 553.25p 3.90%
Ted Baker (TED) 1,964.85p 3.85%
Inchcape (INCH) 599.00p 3.63%
Homeserve (HSV) 996.00p 2.68%
Coats Group (COA) 83.50p 2.45%
Syncona Limited NPV (SYNC) 293.65p 2.32%

FTSE 250 - Fallers

Synthomer (SYNT) 371.91p -6.37%
Victrex plc (VCT) 2,298.00p -3.93%
Rotork (ROR) 284.60p -3.85%
Spirent Communications (SPT) 155.20p -3.72%
Euromoney Institutional Investor (ERM) 1,260.00p -3.08%
Vivo Energy (VVO) 131.58p -2.81%
Polymetal International (POLY) 844.50p -2.30%
Games Workshop Group (GAW) 3,100.00p -2.21%
Rank Group (RNK) 165.00p -1.79%
Drax Group (DRX) 370.20p -1.65%