London close: Blue chips bolstered by slide in pound
London blue chips bounced back on Monday as the pound gave back some of its recent gains, weighed down by criticism of Theresa May's Brexit plans from EU Brexit negotiator Michel Barnier and disappointing manufacturing data.
The FTSE 100 was up by 0.97% or 72.18 points to 7,504.60 as the pound fell 0.61% against the dollar to 1.28799 and 0.73% versus the euro to 1.1088.
Sterling traded lower throughout the session after Barnier said over the weekend that he "strongly opposed" parts of Theresa May's Brexit proposals, but the UK PM pledged to hold her ground.
More specifically, on Sunday Barnier told German daily Frankfurter Allgemeine Zeitung that May's proposal for a common rulebook on goods, but not for services, "would be the end of the single market and the European project."
In his interview with the German daily, Barnier also issued a warning to the UK car industry, claiming that EU firms should be prepared to disregard British manufacturers once the country leaves the bloc.
"In order for EU carmakers to benefit from the tariff benefits of the EU-Korea agreement, only a certain proportion of the services may be provided in a car in a third country," he said.
IG market analyst Joshua Mahony said: "The Brexit optimism of last week has been predictably fleeting, with Barnier ripping Theresa May’s Chequers plans into shreds despite hopes that Friday’s meeting with Raab would herald a significant breakthrough in talks. Unfortunately, history has taught us to be sceptical of any perceived progress, and once again we find ourselves back to square one with no significant headway made on anything apart from the amount we would pay the EU to leave."
Nevertheless, analysts at ING were confident that a deal would finally be agreed, although "it may not be well into the new year before we know for sure".
In that regard, the Dutch broker noted how: "there appears to be an incentive for [Prime Minister May] to leave it as late as she can to agree to a deal with Brussels. The later the deal is agreed, the later Parliament will have its vote, and the more binary the choice between the agreement and a ‘no deal’ Brexit will appear."
The pound's losses deepened after data showed that UK manufacturing activity fell to a two-year low last month as export orders warned. August's UK manufacturing purchasing managers’ index fell to 52.8, IHS Markit reported, which was below the 54 the market had expected and the lowest reading since the sharp fall recorded in July 2016 immediately after the Brexit vote. July's reading was revised down to 53.8 after it was originally reported as having fallen to 54.0 from 54.3 the month before.
Based on previous official data, the latest PMI report suggests manufacturing production will contribute zero growth to the wider UK economy in the third quarter, the survey compiler said.
Further signs of slowdown were recorded in the sector, with rates of expansion in output and new orders eased alongside the first contraction in new export business for over two years. The output balance declined from 55.8 to 53.7.
As far as global trade is concerned, the US and Canada have yet to reach a deal after days of talks failed to yield any kind of breakthrough and the deadline was missed.
On the corporate front, advertising colossus WPP nudged higher as it appointed Mark Read as it new chief executive officer, a day ahead of its half-year results.
M&A activity was behind gains for a clutch of FTSE 350 players, with Computacenter making ground after buying Dutch IT and communication solutions provider Misco Solutions for an undisclosed sum, while Royal Mail edged up as it announced the acquisition of parcel delivery company Dicom Canada for around CAD360m (£213m) on a debt and cash free basis.
Business information provider Ascential was firmer after announcing the acquisition of Brand View, a provider of price and promotion analytics to retailers and manufacturers, for up to £38m.
Renewi slipped as it completed its strategic exit from the UK organic sector with the sale of its Cumbernauld facility.
On the downside, water companies Severn Trent, Pennon Group and United Utilities were all in the red as they submitted their business plans to Ofwat for the next five-year period, 2020-2025.
Polypipe slipped a touch as it bought surface water management solutions supplier and designer Permavoid for up to £16.5m and veterinary pharmaceutical business Dechra Pharmaceuticals slumped as its full-year revenues fell short of expectations.
In broker note action, British American Tobacco was cut to 'underperform' at RBC Capital Markets, along with Imperial Brands. JD Wetherspoon and InterContinental were downgraded to 'sell' at Citi, but Mitchells & Butlers and Whitbread were lifted to 'neutral'.
Restaurant Group was upgraded to 'hold' at Berenberg.
Market Movers
FTSE 100 (UKX) 7,504.60 0.97%
FTSE 250 (MCX) 20,695.85 0.03%
techMARK (TASX) 3,528.17 0.89%
FTSE 100 - Risers
Smurfit Kappa Group (SKG) 3,232.00p 3.19%
Royal Mail (RMG) 461.50p 3.01%
Standard Life Aberdeen (SLA) 324.50p 2.40%
BT Group (BT.A) 222.25p 2.25%
Evraz (EVR) 508.60p 2.23%
Royal Dutch Shell 'B' (RDSB) 2,595.00p 2.15%
Micro Focus International (MCRO) 1,332.00p 2.07%
Anglo American (AAL) 1,571.00p 1.91%
Royal Dutch Shell 'A' (RDSA) 2,549.00p 1.90%
Admiral Group (ADM) 2,118.00p 1.83%
FTSE 100 - Fallers
United Utilities Group (UU.) 727.00p -1.97%
TUI AG Reg Shs (DI) (TUI) 1,400.50p -1.51%
Severn Trent (SVT) 1,971.00p -1.50%
British Land Company (BLND) 629.00p -1.04%
Fresnillo (FRES) 889.80p -0.82%
Tesco (TSCO) 245.00p -0.61%
Land Securities Group (LAND) 911.50p -0.55%
Randgold Resources Ltd. (RRS) 5,000.00p -0.44%
Whitbread (WTB) 4,581.00p -0.33%
Smith (DS) (SMDS) 492.70p -0.26%
FTSE 250 - Risers
Dunelm Group (DNLM) 538.50p 3.56%
Energean Oil & Gas (ENOG) 558.00p 3.53%
Euromoney Institutional Investor (ERM) 1,332.00p 3.42%
Bank of Georgia Group (BGEO) 1,704.40p 3.11%
McCarthy & Stone (MCS) 114.70p 2.96%
Kaz Minerals (KAZ) 478.90p 2.77%
Equiniti Group (EQN) 227.50p 2.71%
Syncona Limited NPV (SYNC) 272.58p 2.44%
Hilton Food Group (HFG) 936.00p 2.41%
Tullow Oil (TLW) 238.20p 2.28%
FTSE 250 - Fallers
Dechra Pharmaceuticals (DPH) 2,452.00p -21.41%
Playtech (PTEC) 504.20p -5.23%
Alfa Financial Software Holdings (ALFA) 158.40p -5.15%
On The Beach Group (OTB) 502.00p -4.37%
Wetherspoon (J.D.) (JDW) 1,192.00p -4.26%
Dairy Crest Group (DCG) 455.40p -4.17%
Rathbone Brothers (RAT) 2,558.00p -2.89%
Kier Group (KIE) 922.00p -2.85%
Aveva Group (AVV) 2,764.00p -2.68%
Howden Joinery Group (HWDN) 481.20p -2.33%