London midday: Stocks turn higher amid trade hopes; services data in focus

London stocks had turned higher by midday on Wednesday amid renewed optimism over a trade deal between the US and China, but a stronger pound meant gains were unspectacular in comparison to European markets.

The FTSE 100 was up 0.3% at 7,178.90, reversing earlier losses but underperforming the main European indices - which were all up 1% or more - as sterling hit a seven-month high against the dollar amid expectations that the Tories will win next week’s general election. The pound was up 0.4% against the greenback at 1.3049 and 0.5% firmer versus the euro at 1.1787.

Sentiment was boosted by a report suggesting that the US and China are moving closer to agreeing a phase one trade deal despite tensions over Hong Kong and Xinjiang. Bloomberg cited people familiar with the talks as saying that the two were edging closer to an agreement on the amount of tariffs that would be rolled back in a phase one deal.

The sources told Bloomberg that US President Donald Trump’s comments at a Nato meeting in London on Tuesday downplaying the urgency of a deal shouldn’t be understood to mean that talks were stalling.

One source said the US legislation passed last week in support of Hong Kong pro-democracy protesters and the more recent legislation, which requires the US president to condemn abuses against Muslims in China, were unlikely to affect the talks.

It was understood that US negotiators expect a phase one deal to be completed before US tariffs are set to rise on 15 December.

Investors were also mulling Chinese and UK services data.

Caixin’s services purchasing managers’ index ticked up to 53.5 from 51.1 in October, beating expectations for a reading of 51.2 and marking the fastest expansion since April. A reading above 50.0 signals expansion, while a reading below indicates contraction.

Caixin’s composite manufacturing and services PMI rose to 53.2 last month from 52.0 in October. This marked the best reading in 21 months.

On home shores, the latest survey from IHS Markit/CIPS showed the services sector shrank in November at the fastest pace since March as worries about Brexit and the upcoming general election took their toll.

The purchasing managers’ index ticked down to 49.3 from 50.0 in October. This was ahead of a flash reading of 48.6 but below the 50.0 level that separates contraction from expansion.

IHS Markit said the index was consistent with UK GDP declining at a quarterly rate of around 0.1%.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "The sector was hemmed in with no room for improvement in November by the fastest fall in the pipeline of new work since July 2016, and the biggest drop in export orders since this index began in September 2014.

"As Brexit nerves continued to affect domestic client decision-making, a veil of silence also descended over European clients in particular who were reluctant to commit until there is more clarity in the UK’s future direction."

In equity markets, steelmaker Evraz and miners Antofagasta, Glencore and Anglo American all gained on trade deal hopes.

Rio Tinto was in the red, however, after saying it had curtailed operations at its Richard Bay Minerals unit in South Africa after one employee was shot and another seriously injured in local violence.

Morrisons was weaker after the supermarket chain appointed current chief finance and commercial officer Trevor Strain to the role of chief operating officer and trading director Michael Gleeson to the role of chief financial officer.

Segro and Moneysupermarket were hit by downgrades to ‘underperform’ at RBC Capital Markets, while Aviva was lower after a downgrade to ‘equalweight’ at Barclays.

Market Movers

FTSE 100 (UKX) 7,178.90 0.28%
FTSE 250 (MCX) 20,585.30 0.41%
techMARK (TASX) 3,990.83 -0.19%

FTSE 100 - Risers

Evraz (EVR) 357.80p 3.59%
Antofagasta (ANTO) 870.40p 2.98%
NMC Health (NMC) 2,459.00p 2.59%
Meggitt (MGGT) 634.80p 2.59%
Ocado Group (OCDO) 1,223.00p 2.43%
Ferguson (FERG) 6,620.00p 2.26%
Hargreaves Lansdown (HL.) 1,796.50p 2.19%
Smith (DS) (SMDS) 376.20p 2.14%
JD Sports Fashion (JD.) 771.80p 1.90%
Legal & General Group (LGEN) 275.60p 1.81%

FTSE 100 - Fallers

Fresnillo (FRES) 564.80p -3.06%
Smith & Nephew (SN.) 1,655.50p -1.58%
Morrison (Wm) Supermarkets (MRW) 193.15p -1.23%
Sage Group (SGE) 724.00p -1.09%
Sainsbury (J) (SBRY) 210.00p -0.94%
Pearson (PSON) 627.20p -0.92%
Diageo (DGE) 3,089.00p -0.91%
BT Group (BT.A) 182.94p -0.90%
Coca-Cola HBC AG (CDI) (CCH) 2,502.00p -0.87%
SEGRO (SGRO) 858.60p -0.85%

FTSE 250 - Risers

Cineworld Group (CINE) 208.90p 5.53%
Kainos Group (KNOS) 626.00p 5.39%
Premier Oil (PMO) 88.42p 4.00%
Investec (INVP) 432.80p 3.66%
Provident Financial (PFG) 422.80p 3.63%
Elementis (ELM) 165.70p 3.24%
Aston Martin Lagonda Global Holdings (AML) 516.40p 3.16%
IP Group (IPO) 59.50p 3.12%
Ferrexpo (FXPO) 144.25p 3.04%
Pets at Home Group (PETS) 248.80p 2.64%

FTSE 250 - Fallers

Sanne Group (SNN) 617.00p -3.59%
Genus (GNS) 3,050.00p -2.68%
Euromoney Institutional Investor (ERM) 1,222.00p -2.40%
FirstGroup (FGP) 115.90p -2.03%
Moneysupermarket.com Group (MONY) 326.70p -1.89%
Unite Group (UTG) 1,201.00p -1.64%
Go-Ahead Group (GOG) 1,987.00p -1.54%
Trainline (TRN) 438.00p -1.46%
Contour Global (GLO) 205.00p -1.44%
Marshalls (MSLH) 763.50p -1.36%