London open: Stocks fall after disappointing Chinese manufacturing data

London stocks fell on Tuesday after Chinese manufacturing data came in weaker than anticipated, fuelling concerns about the world's second largest economy.

China’s official manufacturing purchasing managers’ index dropped to 50.1 in April from 50.2 in March, missing economists’ estimates of 50.4, the National Bureau of Statistics revealed. However it was above the 50 level that separates an expansion from a contraction.

The Caixin PMI on China manufacturing contracted further to 49.4 in April from 49.7 in March, according to Markit, below forecasts of 49.9.

“The decline further into contraction territory in the Caixin manufacturing PMI came as a surprise this morning, especially considering the improvements we’ve seen in the rest of the data over the last month,” said Craig Erlam, senior market analyst at Oanda.

“Given the differences in the official manufacturing reading, which just remained in growth territory for a second month, the numbers would suggest that perhaps the larger state owned firms are benefiting from recent stimulus efforts more so than the small to medium sized private firms.

“The benefits could flow through to them in the coming months but I think today’s data is a reminder of the challenging times ahead for the world’s second largest economy.”

Meanwhile, the Royal Bank of Australia cut interest rates by 25 basis points to 1.75% to address a sharp decline in inflation in March.

Michael Hewson, chief market analyst at CMC Markets, said while the move by the RBA was predicted by many analysts, the slide back into deflation is not too surprising given the recent declines in commodity prices in the first quarter.

“It also ignores the fact that these same prices have rebounded, which means that this may well have been a temporary phenomenon,” he said.

“This, it would appear seems to have escaped the notice of the RBA as they become the latest in a long line of central bankers to adopt the reflex reaction function of cutting rates due to lower prices, ignoring the possibility that in some cases these can be a good thing.”

Turning to Tuesday’s agenda, UK manufacturing PMI is due at 0930 BST while the European Commission provides its latest economist forecasts at 1000 BST.

Meanwhile, oil prices rose with Brent crude up 0.56% to $46.08 per barrel and West Texas Intermediate up 0.57% to $45.04 per barrel.

In company news, mining stocks were under pressure after disappointing Chinese manufacturing. Anglo American, Rio Tinto and Glencore were among the biggest fallers.

HSBC’s shares dipped after reporting a 14% fall in first quarter profits compared to last year.

RSA Insurance got a boost as Barclays upgraded the stock to ‘overweight’ from ‘equalweight’ and lifted the price target to 545p from 457p.

Morrisons gained as it said it has expanded its 'Price Crunch' programme as it seeks to win back customers from discounters.

AstraZeneca declined as it said it has completed the divestment of the global rights to angina treatment Imdur, outside the US, to China Medical System Holdings Ltd and its associated company, Tibet Rhodiola Pharmaceutical Holding Co.

Market Movers

FTSE 100 (UKX) 6,207.45 -0.55%
FTSE 250 (MCX) 16,821.24 0.12%
techMARK (TASX) 3,060.81 0.05%

FTSE 100 - Risers

RSA Insurance Group (RSA) 475.10p 3.49%
Admiral Group (ADM) 1,914.00p 3.07%
Worldpay Group (WI) (WPG) 270.60p 1.39%
Smith & Nephew (SN.) 1,169.00p 1.12%
Direct Line Insurance Group (DLG) 365.70p 1.05%
Informa (INF) 660.50p 0.92%
Rexam (REX) 630.50p 0.88%
Aviva (AV.) 436.10p 0.86%
Carnival (CCL) 3,426.00p 0.85%
Vodafone Group (VOD) 220.80p 0.73%

FTSE 100 - Fallers

Anglo American (AAL) 720.60p -5.61%
Standard Chartered (STAN) 532.50p -3.55%
Rio Tinto (RIO) 2,221.50p -3.43%
Glencore (GLEN) 157.80p -3.13%
Pearson (PSON) 780.50p -3.04%
International Consolidated Airlines Group SA (CDI) (IAG) 510.50p -2.76%
BHP Billiton (BLT) 907.70p -2.72%
Antofagasta (ANTO) 472.90p -2.13%
Rolls-Royce Holdings (RR.) 656.50p -1.94%
AstraZeneca (AZN) 3,856.00p -1.83%

FTSE 250 - Risers

Just Eat (JE.) 413.00p 7.69%
Centamin (DI) (CEY) 128.70p 6.45%
Restaurant Group (RTN) 284.70p 3.49%
Cable & Wireless Communications (CWC) 76.00p 3.26%
Regus (RGU) 299.80p 2.53%
Polymetal International (POLY) 724.50p 2.19%
Interserve (IRV) 436.40p 2.13%
Homeserve (HSV) 422.80p 2.08%
Softcat (SCT) 325.00p 1.88%
Melrose Industries (MRO) 380.20p 1.85%

FTSE 250 - Fallers

Aberdeen Asset Management (ADN) 276.80p -7.33%
Indivior (INDV) 151.80p -5.60%
Tullow Oil (TLW) 268.40p -4.04%
Amec Foster Wheeler (AMFW) 476.80p -3.46%
Ophir Energy (OPHR) 73.00p -3.12%
Sophos Group (SOPH) 199.70p -2.73%
Ocado Group (OCDO) 288.30p -2.47%
Evraz (EVR) 138.70p -2.32%
Petrofac Ltd. (PFC) 827.00p -2.13%
Kaz Minerals (KAZ) 168.00p -2.04%