London midday: Stocks extend gains as trade fears recede

London stocks had extended gains by midday on Friday amid optimism that trade relations between the US and China are improving.

The FTSE 100 was 0.7% higher at 7,231.38, while the pound was flat against the dollar at 1.2178 and 0.1% firmer versus the euro at 1.1031 as the UK and the EU stepped up Brexit talks, with plans to meet twice a week in September.

Han Tan, market analyst at FXTM, said: "Even with the prospects of more engagement between the UK and EU over Brexit, the pound has returned into sub-1.22 territory against the US dollar.

"Pound traders are well aware of the politically-treacherous path that lies ahead in the quest to find a Brexit deal ahead of the October 31 deadline. Still, sterling’s outlook remains dismal at this point in time which is keeping GBPUSD on a slippery slope, with a likelier path towards 1.20."

More broadly, sentiment was being propped up by easing trade tensions between the US and China.

CMC Markets analyst Michael Hewson said: "The decision by China to hold back on any retaliation in response to last week’s US decision to increase tariffs, appears to, for now, have prompted a cautious rebound in equity markets. The more measured tone in deciding to focus on next month’s meeting to discuss removing the extra duties has seen some optimism start to creep back in."

On home shores, the latest GfK consumer confidence index released overnight showed a drop to -14 in August from -11 in July amid worries about Brexit. This marked a six-year low but was above analysts’ expectations for a reading of -12.

Joe Staton, client strategy director at GfK, said: "Until Brexit leaves the front pages - whenever that will be - consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation. That’s an important distinction because a significant development in August is the sudden drop in views on personal finances ‘over the next 12 months’ after the encouraging jump in this measure last month."

Elsewhere, the latest survey from Nationwide showed that house prices were still subdued in August. On the year, they rose 0.6% following a 0.3% increase in July. On the month, meanwhile, prices were flat.

Nationwide’s chief economist, Robert Gardner, pointed out that annual house price growth remained below 1% for the ninth month in a row.

"While house price growth has remained fairly stable, there have been mixed signals from the property market in recent months.

"Surveyors report that new buyer enquiries have increased a little, though key consumer confidence indicators remain subdued. Data on the number of property transactions points to a slowdown in activity, though the number of mortgages approved for house purchase has remained broadly stable."

Investors were also digesting figures showing that lending to UK consumers and businesses slowed further in July, but mortgage lending held up.

In equity markets, software company Micro Focus was the standout gainer on the top-flight index, having tumbled on Thursday on the back of a profit warning.

Guarantor lender Amigo Holdings was also up after heavy losses a day earlier, when it warned that loan book growth for the year would be flat.

Builders merchant Grafton racked up healthy gains after it said half year pre-tax profits rose 5% to £88.2m as the company said it was exiting the Belgian market and had struck a deal with an unnamed buyer. Revenue rose 2% to £1.4bn despite Brexit uncertainty in the UK as Ireland and the Netherlands both recorded strong results.

Iron pellet producer Ferrexpo reversed earlier losses to trade higher even as it said some of the money it gave to a charity "could have been misappropriated”. The company had commissioned an independent probe into the donations to the Blooming Land charity which was set up to manage Ferrexpo's corporate social responsibility programme. It said it had terminated its relationship with the organisation.

Hochschild, Centamin and Polymetal were all lower as gold prices slipped back. Oanda analyst Craig Erlam said: "Gold has pulled back from its highs once again as risk appetite picked up on Thursday. Once again, the rally is showing some signs of weakness, having failed to top its previous high and displaying softer momentum.

"This may change, it's hard to find anyone that's not bullish gold longer term but correction red flags are popping up here and there."

Outside the FTSE 350, value retailer Shoe Zone was the latest casualty in the demise of the high street, with its shares tanking as it warned that full-year results will be below its expectations amid difficult trading conditions, and announced the departure of chief executive Nick Davis.

Market Movers

FTSE 100 (UKX) 7,231.38 0.66%
FTSE 250 (MCX) 19,414.35 0.63%
techMARK (TASX) 3,817.34 0.33%

FTSE 100 - Risers

Micro Focus International (MCRO) 1,120.50p 6.57%
NMC Health (NMC) 2,455.00p 5.46%
Rolls-Royce Holdings (RR.) 773.20p 2.52%
Rio Tinto (RIO) 4,141.50p 2.44%
Ashtead Group (AHT) 2,277.00p 2.43%
Ocado Group (OCDO) 1,308.50p 2.11%
SSE (SSE) 1,147.50p 2.05%
Melrose Industries (MRO) 181.00p 2.00%
Marks & Spencer Group (MKS) 192.00p 1.99%
Smith (DS) (SMDS) 338.00p 1.90%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 616.40p -0.45%
AstraZeneca (AZN) 7,332.00p -0.45%
Direct Line Insurance Group (DLG) 285.40p -0.38%
British Land Company (BLND) 505.94p -0.37%
Hargreaves Lansdown (HL.) 1,891.00p -0.34%
Fresnillo (FRES) 730.80p -0.33%
Smith & Nephew (SN.) 1,962.50p -0.28%
Sainsbury (J) (SBRY) 199.45p -0.28%
Hiscox Limited (DI) (HSX) 1,551.00p -0.19%
International Consolidated Airlines Group SA (CDI) (IAG) 424.70p -0.16%

FTSE 250 - Risers

Grafton Group Units (GFTU) 736.00p 7.84%
Intu Properties (INTU) 40.69p 7.70%
Amigo Holdings (AMGO) 75.54p 6.84%
Wood Group (John) (WG.) 379.23p 5.28%
Petrofac Ltd. (PFC) 420.90p 4.75%
Restaurant Group (RTN) 156.04p 3.68%
Softcat (SCT) 1,047.00p 3.46%
Pennon Group (PNN) 759.80p 3.29%
Serco Group (SRP) 147.04p 3.19%
Sophos Group (SOPH) 390.00p 3.17%

FTSE 250 - Fallers

Hochschild Mining (HOC) 215.54p -5.05%
Centamin (DI) (CEY) 141.50p -3.28%
Polymetal International (POLY) 1,159.00p -1.86%
Acacia Mining (ACA) 261.20p -1.80%
Funding Circle Holdings (FCH) 111.00p -1.77%
Cineworld Group (CINE) 220.20p -1.74%
Metro Bank (MTRO) 273.33p -1.68%
Aston Martin Lagonda Global Holdings (AML) 475.20p -1.43%
Stagecoach Group (SGC) 123.80p -1.35%
Tullow Oil (TLW) 203.20p -1.26%