London close: Stocks buoyed by news from Italy, US
London stocks were higher on Wednesday, in spite of falls for Tesco and market debutant Aston Martin, after Italy's economics minister said the country's budged deficit would be brought down gradually - although analysts remained cautious.
Sentiment was also buoyed by a stronger-than-expected reading on a key US labour market survey that triggered fresh buying on Wall Street.
By the close, the FTSE 100 had added 35.73 points or 0.48% to 7,510.28. Sterling was little changed just below $1.30 as Theresa May gave a speech to the Conservative party conference in defence of her Brexit plans.
On the final day of the Conservative Party annual conference, Prime Minister Theresa May's speech began with a boogie to Abba's 'Dancing Queen' but soon turned serious.
On Brexit, the PM said she was not prepared to accept any deal. "Britain isn’t afraid to leave with no deal if it has to," she said, though it would be "tough at first".
"If we hold our nerve, I know we can get a deal that delivers for Britain."
In Italy, economy minister Giovanni Tria confirmed that the government now plans to cut the budget deficit in 2020 and 2021, after letting it rise in 2019, probably to 2.4% of national output. Speaking in Rome, Tria said: "The deficit will increase compared with the previous forecast in 2019, but then there will be a gradual reduction in the following years."
This news has come as a mild relief for markets, said Craig Erlam, market analyst at Oanda, enough for the FTSE MIB to reverse its losses and Italian bond yields to fall back, "but it's still higher than investors are clearly comfortable with".
He added: "This leaves the Italian government on a collision course with Brussels, something I have no doubt they will relish given the eurosceptic views they hold and the opportunity it presents to cast them as unelected and unaccountable dictators seeking to prevent them following the will of the voters. The constant claims about how much better off Italy could be outside the euro – with yesterday's claims on its own currency solving most problems being the latest – are clearly an attempt to sway public opinion and the budget presents an ideal opportunity to continue these efforts."
Stateside, consultancy ADP reported a 230,000 person gain in US private sector payrolls for the month of September, versus forecasts for a gain of 184,000.
Ian Shepherdson at Pantheon Macroeconomics warned recent hurricanes meant that reading might be distorted, but markets rose nevertheless.
Back in the UK, a survey on the UK's dominant services sector showed a weaker reading for September, though this was not enough to confirm whether the economy maintained its growth trend in the third quarter.
The IHS Markit/CIPS UK services PMI fell to 53.9 from the 54.3 reading the month before, falling short of the 54 expected reading. The services PMI has averaged 53.9 over the third quarter, only very slightly below its second-quarter average of 54.0, pointing to quarterly services output growth of around 0.5% compared to the 0.6% in the official figures for July.
Combined with the last three months surveys on services, manufacturing and construction, Markit said the PMI data suggests the UK economy expanded by just under 0.4% in the third quarter, though other economists' predictions ranged from nearer 0.3% to at least 0.5%.
Chris Williamson, chief business economist at IHS Markit, said the intensification of cost pressures was not a surprise given the spike in oil prices and predicted consumer price inflation is likely to remain closer to 3% than 2% in coming months.
"The steady economic expansion and intensification of cost pressures will add to views that the next move in interest rates will be another hike. However, with Brexit uncertainty intensifying in recent weeks, any rise seems unlikely prior to the scheduled March 29th exit from the EU,” he said.
In corporate news, ITV was one of the top risers as the broadcaster said it was not bidding for Endemol Shine, ending speculation it was preparing a £3bn swoop. Shares in ITV had previously slipped on reports it was considering a bid.
Schroders was up on the back of a Financial Times report that it is poised to win the £109bn mandate from Lloyds Banking Group to manage the Scottish Widows assets that were withdrawn from Standard Life Aberdeen back in February.
Ringing up gains elsewhere was Vodafone as its Italian arm snapped up 5G service airwaves for €2.4bn (£2.14bn) in an auction run by the Italian government. The auction raised €6.bn in total for the Italian treasury.
Tesco led the fallers on the FTSE 100 despite the supermarket colossus reporting a 42% surge in first-half profits as sales accelerated in the second quarter. Like-for-like sales increased 2.2% but while profit before tax and exceptionals roared up to £806m thanks to the March acquisition of Booker, this was short of the £811m that the City expected.
Shares in Greencore, a major supplier to Tesco, were moving higher however.
Elsewhere, Aston Martin shares skidded lower as they began trading after an initial public offer that value the luxury car market at £4.3bn. The shares were priced at 1,900p in the IPO but were quickly shifted into a lower gear, falling 4% to 1,833p in early trading.
Euromoney Institutional Investor was little moved as it agreed to sell its Mining Indaba business, which operates the world's largest annual mining investment conference, for £30.1m to ITE Group. For the year ended 30 September 2017, Mining Indaba reported an adjusted operating profit of £2.5m.
Great Portland Estates edged up after it exchanged contracts to sell 55 Wells Street, W1 to an unnamed overseas investor for a headline sale price of £65.46m.
Jupiter Fund Management was orbiting lower as Berenberg nudged down its expectations for full-year earnings and reduced its price target on the stock.
Market Movers
FTSE 100 (UKX) 7,510.28 0.48%
FTSE 250 (MCX) 20,300.00 0.17%
techMARK (TASX) 3,516.22 0.57%
FTSE 100 - Risers
ITV (ITV) 162.30p 3.77%
Kingfisher (KGF) 261.20p 3.00%
Schroders (SDR) 3,065.00p 2.85%
Paddy Power Betfair (PPB) 6,725.00p 2.44%
Standard Chartered (STAN) 627.40p 2.37%
Melrose Industries (MRO) 199.95p 2.22%
Ocado Group (OCDO) 915.00p 2.19%
Next (NXT) 5,466.00p 2.09%
BT Group (BT.A) 228.85p 2.07%
Informa (INF) 750.80p 1.96%
FTSE 100 - Fallers
Tesco (TSCO) 215.00p -8.59%
DCC (DCC) 6,910.00p -2.95%
Ferguson (FERG) 5,972.00p -1.82%
Compass Group (CPG) 1,679.00p -1.76%
Halma (HLMA) 1,470.00p -1.41%
NMC Health (NMC) 3,380.00p -1.29%
Johnson Matthey (JMAT) 3,434.00p -1.21%
United Utilities Group (UU.) 711.40p -1.14%
RSA Insurance Group (RSA) 579.80p -1.09%
Severn Trent (SVT) 1,842.50p -0.97%
FTSE 250 - Risers
Indivior (INDV) 198.65p 6.23%
Computacenter (CCC) 1,338.00p 4.53%
Greencore Group (GNC) 192.30p 3.95%
Softcat (SCT) 843.00p 3.44%
Weir Group (WEIR) 1,800.00p 3.39%
Inmarsat (ISAT) 501.40p 3.19%
Syncona Limited NPV (SYNC) 302.50p 2.54%
RPC Group (RPC) 827.40p 2.53%
Rotork (ROR) 340.80p 2.34%
Superdry (SDRY) 1,062.00p 2.31%
FTSE 250 - Fallers
Victrex plc (VCT) 3,114.00p -6.54%
Equiniti Group (EQN) 235.00p -5.05%
Homeserve (HSV) 995.00p -4.14%
Jupiter Fund Management (JUP) 391.70p -2.63%
Ted Baker (TED) 2,290.00p -2.53%
Close Brothers Group (CBG) 1,518.00p -2.32%
On The Beach Group (OTB) 494.64p -2.26%
Renishaw (RSW) 4,666.00p -2.26%
Polypipe Group (PLP) 354.60p -1.88%
TBC Bank Group (TBCG) 1,690.00p -1.86%