London midday: Stocks gain, sterling enjoys relief rally

London stocks were off earlier highs but still in the green by midday on Wednesday, with Prudential and Standard Chartered pacing the gains as worries about unrest in Hong Kong receded, while the pound rallied as MPs prepared to vote on a bill to block a no-deal Brexit.

The FTSE 100 was 0.3% higher at 7,291.24, while sterling was up 0.9% against the dollar at 1.2193, having fallen below $1.20 on Tuesday, and 0.6% firmer versus the euro at 1.1069.

Overnight, the Commons voted 328 to 301 to take control of the agenda and bring forward a bill to delay the Brexit deadline until the end of January. Later in the day, MPs will look to pass legislation to prevent a no-deal outcome.

David Cheetham, chief market analyst at XTB, said: "The situation is becoming increasingly absurd with Boris Johnson now likely to seek a snap election - which would be the 3rd in four years despite the fixed term parliament act - while the opposition are cautious to go to the polls.

"Overall this is seen as good news for the pound, with no-deal prospects beginning to recede once more and while we may remain stuck in a political quandary for some time yet, at least the worst case scenario seems to be becoming increasingly unlikely once more."

Labour said earlier that it would not back Johnson's plans for a snap poll.

On the macroeconomic front, the latest reading on the services sector showed that growth practically ground to a halt in August as Brexit concerns took their toll, putting the country on course for a recession.

The IHS/Markit CIPS services purchasing managers' business activity index fell to 50.6 last month from 51.4 in July, missing expectations for a reading of 51.0 and only a touch above the 50.0 mark that separates contraction from expansion.

The new orders balance fell to 50.8 from 53.0 and the employment balance declined to 50.5 from 52.6 while confidence about activity in the next 12 months hit its lowest level since July 2016 amid worries about the impact of political uncertainty on client decision-making.

Chris Williamson, chief business economist at IHS Markit, said: "Business activity in the service sector almost stalled in August as Brexit-related worries escalated, curbing spending by both businesses and consumers. So far this year the services economy has reported its worst performance since 2008, with worrying weakness seen across sectors such as transport, financial services, hotels and restaurants, and business-to-business services.

"After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the UK economy is slipping into recession. The PMI surveys are so far indicating a 0.1% contraction of GDP in the third quarter."

In equity markets, Asia-focused stocks were the standout gainers, with Prudential, Burberry and Standard Chartered all higher after Hong Kong's leader, Carrie Lam, withdrew the controversial extradition bill that has prompted months of protests.

Royal Bank of Scotland was in the green as it said a last minute higher-than-expected spike in claims for payment protection insurance claims would result in an extra charge of £600m to £900m in the third quarter. The deadline for claims expired on August 29 and RBS on Wednesday said it had so far made provisions of £5.3bn of which £4.9bn had been utilised.

On the downside, Barratt Developments fell. It posted an 8.9% increase in full-year pre-tax profit but revenue came in slightly lower than expected at £4.8bn and the company said it expects to grow volumes towards the lower end of its medium-term target range in FY20.

Homeware retailer Dunelm reversed earlier gains to trade sharply lower as it posted a 23.5% jump in full-year pre-tax profit but struck a cautious note on the outlook amid Brexit-related uncertainty.

Avast was under pressure after Sybil Holdings sold off its entire 12.4% stake in the cybersecurity company.

Market Movers

FTSE 100 (UKX) 7,291.24 0.32%
FTSE 250 (MCX) 19,566.28 0.52%
techMARK (TASX) 3,863.03 0.27%

FTSE 100 - Risers

Prudential (PRU) 1,410.00p 4.52%
Standard Chartered (STAN) 645.80p 3.36%
Burberry Group (BRBY) 2,255.00p 3.16%
Marks & Spencer Group (MKS) 191.60p 2.60%
Smith (DS) (SMDS) 338.10p 2.55%
Melrose Industries (MRO) 186.35p 2.14%
Flutter Entertainment (FLTR) 7,036.00p 2.09%
Schroders (SDR) 2,806.00p 1.89%
Johnson Matthey (JMAT) 3,056.00p 1.76%
Informa (INF) 863.60p 1.65%

FTSE 100 - Fallers

Barratt Developments (BDEV) 601.60p -3.28%
Relx plc (REL) 1,977.00p -1.64%
Ocado Group (OCDO) 1,325.50p -1.38%
United Utilities Group (UU.) 808.60p -1.05%
Micro Focus International (MCRO) 1,102.20p -1.04%
Berkeley Group Holdings (The) (BKG) 3,844.00p -0.98%
Unilever (ULVR) 5,274.00p -0.94%
London Stock Exchange Group (LSE) 6,968.00p -0.94%
Compass Group (CPG) 2,118.50p -0.91%
Hiscox Limited (DI) (HSX) 1,547.00p -0.83%

FTSE 250 - Risers

Metro Bank (MTRO) 279.40p 6.16%
Intu Properties (INTU) 36.70p 5.94%
Aston Martin Lagonda Global Holdings (AML) 517.40p 3.90%
Greencore Group (GNC) 225.40p 3.87%
Games Workshop Group (GAW) 4,720.00p 3.46%
B&M European Value Retail S.A. (DI) (BME) 358.90p 3.46%
IP Group (IPO) 57.70p 3.41%
Premier Oil (PMO) 82.15p 3.39%
Kaz Minerals (KAZ) 391.70p 3.00%
Equiniti Group (EQN) 211.20p 2.92%

FTSE 250 - Fallers

Dunelm Group (DNLM) 803.50p -8.75%
Kainos Group (KNOS) 459.13p -7.25%
Restaurant Group (RTN) 127.70p -5.69%
Barr (A.G.) (BAG) 619.68p -3.93%
Avast (AVST) 372.40p -3.47%
Acacia Mining (ACA) 265.80p -2.57%
Amigo Holdings (AMGO) 71.50p -2.46%
Provident Financial (PFG) 382.67p -2.33%
Pets at Home Group (PETS) 229.20p -2.22%
Ted Baker (TED) 943.28p -1.84%