London close: News from overseas helps offset poor factory figures at home
London stocks reclaimed the 7,000 point mark on Friday as the pound was knocked lower by a disappointing reading on the UK manufacturing sector, but also helped by the release of a very strong US non-farm payrolls report for the month of January.
The FTSE 100 was up by 0.74% or 51.37 points at 7,020.22 as sterling fell 0.2% against the dollar to 1.30894 and 0.35% versus the euro to 1.1412 even as data revealed that UK factory output dropped more than expected at the start of 2019.
The IHS Markit purchasing managers' index fell from 54.2 in December to 52.8 in January, the second-weakest reading since the referendum, suggesting the sector will drag on overall economic growth. Economists were on average expecting a PMI reading of 53.5.
The figures also showed that UK manufacturing companies are stockpiling raw materials and finished goods at the greatest rate since records began as they prepare for a potentially chaotic no-deal Brexit.
Francesco Arcangeli, economist at the EEF industry trade body, warned that the manufacturers were worried about a "perfect storm" building from Brexit and a European slowdown.
Adding to the gloomy prospects for global growth, China's Caixin/Markit manufacturing purchasing managers’ index for January came in at 48.3, down from 49.7 in December, marking its worst reading since February 2016 and missing expectations for a reading of 49.5.
However, there was hope provided for the market from the latest developments between the US and China, after President Trump said on Thursday that he will meet with Chinese President Xi Jinping soon to seal a deal on trade.
Speaking at the White House during a meeting with Chinese vice premier Liu He following two days of trade talks between US and Chinese delegates, Trump said he was optimistic that the two nation could reach "the biggest deal ever made".
On a more positive note, according to the US Department of Labor, payroll growth in the US private sector an average pace of 234,000 over the three months to January - its best showing in three years.
Commenting on the monthly US jobs figures, Ian Shepherdson at Pantheon Macroeconomics said: "So much for the idea that the drop in stock prices would quickly work through into the real economy.
"[...] Overall, then, this is a strong report, showing that labor demand continues to rise rapidly, and that wage gains continue to grind higher. We see no support here for the Fed's shift, and if wage gains rise over the next year as much they have over the past year, thereby hitting 4.1% a year from now, the idea that the Fed won't hike further will turn to dust."
In UK corporate news, Paddy Power Betfair rallied after saying it had bought an initial 51% controlling stake in Georgian betting outfit Adjarabet for £101m, adding that it expected to snap up the rest of the company within three years.
Exhibitions, events and business intelligence group Informa edged up as it announced the sale of its Life Sciences Media Brands portfolio to US-based healthcare, education and market research company MJH Associates for just over $100m.
Euromoney rose as it said on that trading between 1 October and 31 December 2018 was in line with board expectations and its outlook is unchanged.
UK energy supplier SSE was a touch weaker after saying it was selling 49.9% of its Scottish Stronelairg and Dunmaglass wind farms to Greencoat UK Wind and an unnamed UK pension fund for £635m. Greencoat was a just a touch weaker.
Glencore was on the back foot as it emerged that the commodities giant was in a standoff with the Democratic Republic of Congo over plans to separate uranium from cobalt mined in the country. Glencore's production report showed it unearthed more copper, cobalt and nickel in the fourth quarter of 2018 compared to the quarter before, while zinc, lead, gold and silver dipped.
TalkTalk tumbled as it reported further good growth of customer numbers in the third quarter but trimmed its full-year profit guidance due to IFRS 15 timing adjustments and investment growth.
Plastic packaging company RPC Group, which now has both Apollo Global Management and US packaging group Berry Global vying for its attention, slipped as it said third-quarter operating profit was broadly flat on the previous year.
In broker note action, Plus500 rallied on the back of an upgrade to ‘add’ at Peel Hunt, while Rio Tinto was lifted to ‘add’ at AlphaValue, but Intertek was downgraded to ‘hold’ at Jefferies.
Close Brothers was knocked lower by a downgrade to ‘sell’ at Citi, while Rentokil was boosted by an upgrade to ‘buy’ by the same outfit.
Market Movers
FTSE 100 (UKX) 7,020.22 0.74%
FTSE 250 (MCX) 18,811.37 0.53%
techMARK (TASX) 3,382.74 0.27%
FTSE 100 - Risers
Melrose Industries (MRO) 174.20p 3.68%
Coca-Cola HBC AG (CDI) (CCH) 2,635.00p 3.01%
CRH (CRH) 2,250.00p 2.74%
Croda International (CRDA) 4,942.00p 2.51%
3i Group (III) 870.20p 2.42%
Experian (EXPN) 1,954.50p 2.22%
Anglo American (AAL) 1,985.20p 2.18%
Hargreaves Lansdown (HL.) 1,669.50p 2.17%
Admiral Group (ADM) 2,118.00p 2.08%
Direct Line Insurance Group (DLG) 343.60p 2.05%
FTSE 100 - Fallers
Fresnillo (FRES) 970.40p -3.44%
GVC Holdings (GVC) 664.50p -1.12%
Glencore (GLEN) 306.18p -1.05%
BT Group (BT.A) 230.75p -1.03%
Intertek Group (ITRK) 4,868.00p -0.61%
Centrica (CNA) 135.70p -0.51%
Tesco (TSCO) 222.00p -0.49%
British Land Company (BLND) 571.00p -0.42%
Auto Trader Group (AUTO) 455.90p -0.24%
Smith & Nephew (SN.) 1,432.00p -0.21%
FTSE 250 - Risers
Metro Bank (MTRO) 1,200.00p 10.40%
Kaz Minerals (KAZ) 619.00p 4.31%
Bank of Georgia Group (BGEO) 1,593.60p 4.01%
PZ Cussons (PZC) 185.60p 3.75%
Rank Group (RNK) 161.20p 3.53%
G4S (GFS) 202.00p 3.30%
CLS Holdings (CLI) 253.00p 3.27%
Royal Mail (RMG) 276.80p 3.25%
TI Fluid Systems (TIFS) 195.90p 3.11%
IP Group (IPO) 109.20p 3.02%
FTSE 250 - Fallers
TalkTalk Telecom Group (TALK) 106.30p -4.75%
Renishaw (RSW) 4,456.00p -4.58%
Greencore Group (GNC) 185.10p -4.09%
Jupiter European Opportunities Trust (JEO) 699.00p -3.32%
Greencoat UK Wind (UKW) 129.40p -3.29%
Premier Oil (PMO) 72.05p -2.57%
Funding Circle Holdings (FCH) 312.00p -2.50%
Syncona Limited NPV (SYNC) 262.50p -2.42%
Superdry (SDRY) 505.50p -2.03%
Games Workshop Group (GAW) 2,965.00p -1.98%