London close: Stocks fall and pound gains as manufacturing optimism rises
London’s benchmark remained in the red by the close on Wednesday, as sterling was positive against its major pairs after the latest manufacturing survey from the Confederation of British Industry.
The FTSE 100 ended the day down 0.51% at 7,571.92, heading further south through the afternoon after a positive start to the day, while the FTSE 250 managed gains of 0.08% to settle at 21,762.98.
Concerns over the spread of the Wuhan strain of coronavirus appeared to be largely shrugged off by investors earlier in the day, as even markets in Asia, where more infections are consistently emerging, closed positive overnight.
“The Chinese government’s response to the health situation seems to be more upfront than their handling of the SARS crisis, so traders aren’t as fearful,” said CMC Markets analyst David Madden earlier.
“Huge numbers of people are expected to be on the move during the Lunar New Year holiday, so the situation could worsen, and that is why some traders aren’t overly bullish this morning.”
Sterling was last up 0.61% against the dollar at $1.3130 and had added 0.6% on the euro at €1.1847, after the latest survey from the CBI showed that optimism in the manufacturing sector improved at its fastest pace in the three months to January since 2014.
The CBI’s manufacturing optimism gauge rose to +23 in January from -44 in October.
“It’s clear manufacturers are entering the new year with a spring in their step,” said CBI deputy chief economist Anna Leach.
“Firms are now planning to invest more in plants and machinery, which will ultimately help increase capacity and output.
"However, this boost to sentiment belies poor trading conditions over the past quarter, with output and orders still declining.”
Capital Economics said the rebound in the main balances of the CBI industrial trends survey offered further evidence that sentiment had taken an upward turn after the general election.
“This should help to convince the [Monetary Policy Committee] to not cut rates at its meeting at the end of the month,” the researchers wrote.
Elsewhere, data from the Office for National Statistics showed that public borrowing eased in December, beating analyst expectations.
Public sector net borrowing excluding public sector banks was £4.8bn in December, around £0.2bn less than December 2018.
Analysts had been looking for a figure closer to £5.3bn.
“The latest public finance data continue to suggest that the economy was sluggish, but did not grind to a halt last year,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
On the corporate front, housebuilder Berkeley Group held on to its gains, closing up 4.36% after saying it will return £1bn to shareholders over the next two years, which is a £455m increase.
Other housebuilders joined the fray, with Taylor Wimpey rising 0.98% and Persimmon ahead 0.81%.
Software company Sage was 3.9% firmer, after it said first-quarter recurring revenue increased 10.7% year-on-year to £410m.
That was underpinned by software subscription growth of 24.8% to £286m as it continued to focus on migrating existing customers and attracting new customers to subscription and the cloud.
Credit-checking firm Experian was lifted by an upgrade to ‘overweight’ at Morgan Stanley, adding 1.26%.
On the downside, travel company TUI lost 5.53%, with traders pointing to news that Boeing’s 737 MAX is set to remain grounded until mid-2020.
The stock was also dented by a downgrade to ‘hold’ at Stifel.
Antofagasta was in the red even by 4.53%, as the Chilean copper miner hailed record full-year copper production despite a dip in the fourth quarter partly due to unrest in Chile.
Luxury fashion brand Burberry was off 4.99% as it posted a rise in third-quarter sales and lifted its revenue guidance for the year but said sales in Hong Kong were dented by unrest.
“It is hard to square the market reaction with today’s trading update,” said Russ Mould, investment director at AJ Bell.
“Revenue upgrades and a solid quarterly sales performance would typically see a company be rewarded rather than greeted with raspberries by the market.”
Mould said the “strong run” the shares had enjoyed in recent months could have prompted some profit taking, with the reminder of how closely the company’s fortunes remained tied to China possibly provoking some nervousness given the spread of coronavirus.
“The political disruption in Hong Kong is also having an impact too.”
J Sainsbury was down 2.07%, after the supermarket chain said retail and operations director Simon Roberts will become chief executive from 1 June, succeeding Mike Coupe.
Close Brothers tumbled 4.91% after it said in a pre-close trading update that the loan book remained broadly flat in a "difficult UK economic environment".
FTSE 100 - Risers
Berkeley Group Holdings (The) (BKG) 5,412.00p 4.36%
Sage Group (SGE) 762.60p 3.90%
London Stock Exchange Group (LSE) 7,986.00p 3.61%
Aveva Group (AVV) 5,160.00p 2.58%
Intertek Group (ITRK) 6,050.00p 1.99%
Mondi (MNDI) 1,638.50p 1.87%
SSE (SSE) 1,503.00p 1.38%
Standard Life Aberdeen (SLA) 320.00p 1.30%
SEGRO (SGRO) 904.80p 1.23%
St James's Place (STJ) 1,132.50p 1.12%
FTSE 100 - Fallers
TUI AG Reg Shs (DI) (TUI) 837.00p -5.53%
NMC Health (NMC) 1,407.00p -5.38%
Burberry Group (BRBY) 2,150.00p -4.99%
Antofagasta (ANTO) 907.00p -4.53%
BT Group (BT.A) 174.54p -2.26%
Rolls-Royce Holdings (RR.) 649.00p -2.26%
Sainsbury (J) (SBRY) 208.00p -2.07%
BP (BP.) 480.50p -2.01%
Meggitt (MGGT) 679.40p -1.82%
Imperial Brands (IMB) 1,952.60p -1.63%
FTSE 250 - Risers
Trainline (TRN) 509.00p 6.15%
PPHE Hotel Group Ltd (PPH) 2,060.00p 4.04%
Synthomer (SYNT) 339.80p 3.28%
Beazley (BEZ) 552.50p 3.27%
Airtel Africa (AAF) 72.90p 2.97%
IntegraFin Holding (IHP) 476.00p 2.92%
Mitchells & Butlers (MAB) 413.50p 2.86%
IP Group (IPO) 69.30p 2.82%
Clarkson (CKN) 3,070.00p 2.68%
Provident Financial (PFG) 473.40p 2.40%
FTSE 250 - Fallers
Tullow Oil (TLW) 49.60p -6.38%
Close Brothers Group (CBG) 1,490.00p -4.91%
Hunting (HTG) 335.00p -3.96%
Kaz Minerals (KAZ) 516.60p -3.87%
Cairn Energy (CNE) 186.00p -3.07%
Cineworld Group (CINE) 187.60p -2.90%
Galliford Try (GFRD) 132.58p -2.79%
Future (FUTR) 1,452.00p -2.42%
Renishaw (RSW) 3,516.00p -2.33%
Playtech (PTEC) 368.10p -2.23%