London midday: Stronger pound drags stocks lower

London stocks had fallen further into the red by midday on Tuesday, bucking the broader trend in equity markets and dragged lower by a stronger pound despite encouraging Chinese and UK manufacturing data.

The FTSE 100 was down 1.1% at 5,896.08, while sterling was 0.7% higher against the greenback at 1.3461. A firmer pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from overseas.

Spreadex analyst Connor Campbell said: "The index hasn’t been helped by the pound’s continued rise against the dollar, the greenback suffering in the aftermath of last week’s dovish Jackson Hole address from Federal Reserve head honcho Jerome Powell.

"It’s an incredible turnaround from the sub-$1.15 lows struck in mid-March, made all the more remarkable considering it comes against a backdrop of Brexit angst, with Michel Barnier and David Frost holding emergency talks this Tuesday to try and find a way forwards. And they might struggle to - Barnier reportedly ‘won’t even discuss’ fishing rights, one of the key sticking points between the UK and EU."

A private sector survey released earlier showed Chinese factory activity rose at its fastest pace for almost a decade in August as export orders increased for the first time this year.

The Caixin/Markit manufacturing purchasing managers' index rose to 53.1 from 52.8 a month earlier, beating the consensus forecast of 52.6. A reading of 50 separates growth from expansion.

The reading was the fourth straight month of manufacturing growth and the sector's biggest expansion since January 2011. Factories in the world's second-biggest economy reported the first rise in new export orders of 2020 as overseas markets unlocked their economies, leading to a big gain in Chinese production.

There was some good news on home shores too as a survey showed factory output rose at its fastest rate for more than six years as activity picked up after the Covid-19 lockdown, although manufacturers continued to cut jobs.

The IHS Markit/CIPS purchasing managers' index rose to a 30-month high of 55.2 in August, up from 53.3 in July. The score was just short of an earlier "flash" reading. A reading of more than 50 indicates expansion.

Manufacturing production rose at the fastest pace since May 2014 with solid expansion across the sector. Intermediate goods had the strongest growth and investment goods were weakest. However, factories cut jobs for the seventh month running in one of the steepest declines in the past 11 years. Job cuts hit all parts of the sector and firms of all sizes.

In equity markets, engine maker and dollar-earner Rolls-Royce was the worst performer on the FTSE 100.

Elsewhere, British Airways and Iberia parent IAG was under the cosh after a downgrade to ‘neutral’ at JPMorgan, while investment platform AJ Bell was knocked lower by a rating downgrade at Jefferies.

Trainline slumped after the company’s chief executive sold 800,000 shares, while budget airline Wizz Air flew lower after saying it expects capacity for the second quarter to remain at roughly 60%.

On the upside, Dunelm rose after saying trading was well ahead of its expectations in the past two months, helped by demand that built up during the Covid-19 lockdown. The homewares retailer said total sales surged 59% in July from a year earlier partly from pent-up demand from store closures and the timing of its summer sale. Sales rose 24% in August.

Precious metals miners Fresnillo, Polymetal and Hochschild rose as gold prices advanced, while miners such as Glencore, Anglo American and Antofagasta were boosted by the solid Chinese manufacturing data.

Market Movers

FTSE 100 (UKX) 5,896.08 -1.13%
FTSE 250 (MCX) 17,613.74 -0.98%
techMARK (TASX) 3,774.50 -1.23%

FTSE 100 - Risers

Fresnillo (FRES) 1,339.00p 6.06%
Glencore (GLEN) 172.94p 2.22%
Anglo American (AAL) 1,863.20p 1.67%
Polymetal International (POLY) 2,058.00p 1.48%
Antofagasta (ANTO) 1,089.50p 1.44%
Avast (AVST) 543.50p 1.40%
BHP Group (BHP) 1,732.80p 1.17%
Scottish Mortgage Inv Trust (SMT) 969.00p 0.78%
Berkeley Group Holdings (The) (BKG) 4,593.00p 0.75%
Pennon Group (PNN) 1,013.00p 0.70%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 219.70p -8.88%
International Consolidated Airlines Group SA (CDI) (IAG) 202.50p -6.38%
Melrose Industries (MRO) 96.68p -5.03%
WPP (WPP) 613.20p -5.02%
NATWEST GROUP PLC ORD 100P (NWG) 108.00p -4.26%
British Land Company (BLND) 350.20p -4.24%
Lloyds Banking Group (LLOY) 27.15p -4.22%
Compass Group (CPG) 1,169.50p -4.18%
Taylor Wimpey (TW.) 117.70p -3.92%
Standard Life Aberdeen (SLA) 228.20p -3.79%

FTSE 250 - Risers

Hochschild Mining (HOC) 253.40p 5.32%
Pershing Square Holdings Ltd NPV (PSH) 2,115.00p 4.96%
Apax Global Alpha Limited (APAX) 174.80p 4.17%
Airtel Africa (AAF) 58.90p 3.33%
Kaz Minerals (KAZ) 593.60p 2.34%
Dunelm Group (DNLM) 1,462.00p 2.31%
Helios Towers (HTWS) 156.00p 1.96%
FDM Group (Holdings) (FDM) 1,064.00p 1.92%
Edinburgh Worldwide Inv Trust (EWI) 281.50p 1.62%
Polar Capital Technology Trust (PCT) 2,210.00p 1.61%

FTSE 250 - Fallers

Trainline (TRN) 362.40p -8.53%
Wizz Air Holdings (WIZZ) 3,584.00p -7.82%
Meggitt (MGGT) 272.30p -6.39%
Inchcape (INCH) 476.60p -5.72%
Aggreko (AGK) 450.60p -5.57%
Carnival (CCL) 1,000.00p -5.17%
Provident Financial (PFG) 233.80p -5.11%
FirstGroup (FGP) 41.44p -5.08%
easyJet (EZJ) 601.80p -4.96%
Shaftesbury (SHB) 503.00p -4.91%