London midday: Stocks turn up as deficit unexpectedly widens

London stocks had reversed earlier losses to trade up just a touch by midday on Tuesday as data revealed an unexpected widening of the UK deficit ahead of the Autumn Budget.

The FTSE 100 was up 0.1% to 7,399.77, while the pound was up 0.1% against the euro at 1.1286 and flat versus the dollar at 1.3236.

Data released by the Office for National Statistics earlier in the day showed UK public sector net borrowing increased more than expected last month, primarily driven by a surge in interest payments on index-linked gilts due to the rise in inflation.

Public sector net borrowing excluding stakes in public sector banks rose to £8.0bn in October, above the £7.5bn in the same month last year and the consensus forecast of £7.1bn.

Total borrowing, the public deficit, stood at £7.46bn in October, more than the £6.5bn expected and above the £4.43bn last year.

But low borrowing earlier in the fiscal year means the government has borrowed only £38.5bn since April, £4.1bn lower than in the same months of 2016/17.

Still, the UK's total public debt stood at £1.79trn at the end of October, an increase of £147.8bn over the past 12 months and equating to 87.2% of the value of annual gross domestic product.

Howard Archer, chief economic advisor to the EY ITEM Club, said: "Wednesday’s Budget is not going to be easy for the Chancellor. The Chancellor is under pressure to increase levels of Government spending, but also faces larger deficits over the medium-term due to the Office for Budget Responsibility downgrading its productivity growth forecasts for the UK."

Investors were also mulling the latest survey from the CBI, which showed UK manufacturing output growth leapt to a 29-year high in November as the weak pound drives export demand, though Brexit uncertainty is holding back investment.

The CBI's industrial trends survey found a balance of 17% more manufacturers reporting total orders above normal, which was the highest average since August 1988.

The pick-up was driven by the export orders balance, which leapt to +20, equal to the record high from June 1995 and soaring from +5 in October.

In corporate news, EasyJet flew higher despite reporting a drop in annual profit as chief executive Carolyn McCall prepared to leave the budget airline after seven years in charge, after saying it sees a winter price boost following the collapse of Monarch Airlines.

Specialists building products supplier SIG was on the front foot after it said group revenue from continuing operations rose 6.7% in the period from 1 July to 31 October, while Telecom Plus advanced as it said profits for the full year are expected to be "slightly ahead" of current market expectations and reported a rise in profit and revenue for the first half.

On the downside, catering group Compass fell despite posting a rise in full-year profit as revenue grew thanks in part to a solid performance in North America, while Johnson Matthey retreated as it reported a 2% drop in first-half operating profit.

Home improvement retailer Kingfisher fell despite showing improved like-for-like sales in the third quarter as management kept a lid on disruption from turnaround plans.

Aggreko tanked as investors focused on disappointing order intake and weakness in Argentina in the temporary power provider's third quarter results.

Building materials group CRH was also on the back foot even as it said it continues to expect another year of progress as it reported an increase in sales for the first nine months.

Intertek was in the red despite reporting a jump in revenue for the year to date, while Babcock International fell even as its underlying revenue rose 6% in the first half.

Melrose Industries was under the cosh after a trading update, as it said Nortek faces currency headwinds in 2018 and that the market for Brush has been "very difficult".

Premier Oil gushed lower after a Barclays downgrade to 'underweight', while Mediclinic fell after it was cut to 'underperform' by Macquarie and United Utilities was lower after a downgrade to 'sell' at Investec.

Market Movers

FTSE 100 (UKX) 7,399.77 0.14%
FTSE 250 (MCX) 19,863.34 -0.04%
techMARK (TASX) 3,448.63 -0.12%

FTSE 100 - Risers

easyJet (EZJ) 1,367.00p 6.96%
Imperial Brands (IMB) 3,102.50p 2.49%
Standard Life Aberdeen (SLA) 431.70p 2.15%
Prudential (PRU) 1,914.50p 1.73%
International Consolidated Airlines Group SA (CDI) (IAG) 607.50p 1.42%
Carnival (CCL) 5,010.00p 1.11%
BP (BP.) 497.40p 1.10%
Aviva (AV.) 505.07p 0.91%
TUI AG Reg Shs (DI) (TUI) 1,337.00p 0.83%
Berkeley Group Holdings (The) (BKG) 3,779.00p 0.83%

FTSE 100 - Fallers

Intertek Group (ITRK) 5,185.00p -4.07%
Mediclinic International (MDC) 518.00p -3.81%
Compass Group (CPG) 1,537.00p -3.39%
Babcock International Group (BAB) 732.00p -2.98%
Johnson Matthey (JMAT) 3,180.00p -2.75%
Convatec Group (CTEC) 197.20p -1.89%
Bunzl (BNZL) 2,154.00p -1.64%
Kingfisher (KGF) 300.00p -1.45%
GlaxoSmithKline (GSK) 1,300.34p -1.00%
CRH (CRH) 2,714.00p -0.95%

FTSE 250 - Risers

SIG (SHI) 172.40p 8.02%
Cairn Energy (CNE) 217.90p 5.37%
Intermediate Capital Group (ICP) 1,055.00p 4.35%
Telecom Plus (TEP) 1,201.00p 3.53%
Hunting (HTG) 529.00p 3.22%
Entertainment One Limited (ETO) 300.00p 2.92%
Bovis Homes Group (BVS) 1,144.00p 2.69%
Homeserve (HSV) 828.00p 2.67%
Acacia Mining (ACA) 183.20p 2.58%
Halma (HLMA) 1,318.00p 2.57%

FTSE 250 - Fallers

Aggreko (AGK) 883.41p -8.93%
Melrose Industries (MRO) 202.00p -6.18%
Spire Healthcare Group (SPI) 237.90p -3.68%
FDM Group (Holdings) (FDM) 914.50p -2.66%
Dixons Carphone (DC.) 152.00p -2.63%
Mitie Group (MTO) 219.70p -2.53%
Inmarsat (ISAT) 483.35p -2.35%
TalkTalk Telecom Group (TALK) 158.20p -2.22%
Crest Nicholson Holdings (CRST) 515.00p -2.00%
Evraz (EVR) 276.90p -1.98%