London close: Stocks jump on positive macro data and WHO decision
London stocks raced higher on Friday, boosted by better-than-expected services and manufacturing data, and as fears over the spread of a new coronavirus in China receded.
The FTSE 100 was up 1.04% at 7,585.20, with sentiment boosted after the World Health Organisation decided overnight that the coronavirus was not yet a global emergency.
CMC Markets analyst David Madden said: "The situation is getting worse in China as the number of confirmed infections and deaths has increased, but the fact the international health body said it is not yet a worldwide emergency, has lifted market confidence.
"Stocks declined recently for fear the situation would turn into a global crisis, but the update from the WHO has acted as a green light to the bulls."
On home shores, the latest survey form IHS Markit CIPS showed that the UK economy returned to growth in January, but analysts were divided over whether this would be enough to keep the Bank of England from cutting interest rates next week.
The composite purchasing managers’ index - which measures activity in both the manufacturing and services sectors - rose to 52.4 in January from 49.3 in December, coming in above consensus expectations for a reading of 50.7.
The services PMI increased to 52.9 from 50.0, versus expectations of 51.1. The manufacturing PMI, meanwhile, printed at 49.8 this month from 47.5 in December, surpassing expectations of 48.8.
Business activity expanded for the first time in five months, driven by the sharpest increase in new work since September 2018.
Chris Williamson, chief business economist at IHS Markit, said: "The survey data indicate an encouraging start to 2020 for the UK economy. Output grew at the fastest rate for sixteen months amid rising demand for both manufacturing and services, suggesting business is rebounding after declines seen late last year.
"Intensifying political and economic uncertainty ahead of the general election has started to ease, encouraging more spending and helping push business expectations of future growth to its highest since mid-2015."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the data was strong enough for the Monetary Policy Committee to keep interest rates on hold next week.
"The big jump in the composite PMI- the fifth largest month-to-month gain since the survey started in 1998 - makes it likely, though not absolutely certain, that the MPC will pause for thought next week," he said.
However, Neil Wilson, chief market analyst at Markets.com, said: "Yes the PMIs bounced bac [...] but this was entirely to be expected and reflects businesses letting out a collective sigh of relief after the Conservative Party victory in the December election as it heralded an end to the paralysis over Brexit and killed off the prospect of a radical Jeremy Corbyn-led government.
"Businesses ought to be a damn sight more confident as a result - it does mean that we’re out of the woods. Ultimately, whilst clearly diminishing the case for a cut, I don’t see these PMI surveys as being enough to prevent the Bank from cutting - I think they have already decided on this."
Wilson argued that the recent harder data has been "a lot less auspicious", with GDP weak and inflation coming off sharply.
"The Bank doesn’t want to get behind the curve of market expectations, and is seeking to get a jump on markets whilst still teeing up the cut. It would be following the Fed’s playbook in cutting early in order to prevent a downturn. This is the key thing to remember – the Bank does not want to let a weaker economy fester," he said.
In corporate news, medical technology firm Smith & Nephew rose after saying it had bought California-based Tusker Medical for an undisclosed sum.
Shares of Auto Trader also raced higher, boosted by a price target revision from Morgan Stanley from 560.0p to 650.0p.
The broker said that Auto Trader was a good way to "play" the UK macro recovery and that the market was overestimating the competitive threat.
Micro Focus International gained on the back of better-than-expected quarterly numbers from US chipmaker Intel released overnight.
Morrison was sought out after the grocer announced plans to create a net 4,000 new jobs in the UK, with a bumper set of quarterly numbers out of French rival Carrefour likely also buoying sentiment towards the sector.
On the downside, NMC Health was sharply lower after Dubai’s Emirates NBD Bank sold off just under 2.2m shares in the UAE healthcare provider.
Just Eat fell as Takeaway.com said it will delay the timetable for the £6bn merger with its London-listed rival by a week after the Competition and Markets Authority said it plans to investigate the deal. The UK competition watchdog announced late on Thursday that it was considering whether the deal would lead to a "substantial lessening" of competition.
Marston’s was down even as it said that festive Britons helped the pub group to deliver a rise in sales over the Christmas period despite poor weather keeping people at home in the first three weeks of December. The weakness in the shares came as the company also warned that the planned rise in the National Minimum Wage from April was likely to affect profits.
Shares in payments company Finablr tumbled after it said 392.2m of its shares, more than half of its stock, have been pledged as security for borrowings by Travelex.
FTSE 100 - Risers
Auto Trader Group (AUTO) 595.60p 3.44%
Hargreaves Lansdown (HL.) 1,837.00p 3.41%
Morrison (Wm) Supermarkets (MRW) 187.65p 2.99%
Rentokil Initial (RTO) 481.40p 2.95%
Smith & Nephew (SN.) 1,930.00p 2.66%
Unilever (ULVR) 4,484.00p 2.64%
British Land Company (BLND) 593.20p 2.63%
Experian (EXPN) 2,685.00p 2.60%
SEGRO (SGRO) 915.80p 2.55%
Halma (HLMA) 2,156.00p 2.47%
FTSE 100 - Fallers
NMC Health (NMC) 1,347.50p -4.06%
Just Eat (JE.) 865.60p -1.70%
Whitbread (WTB) 4,302.00p -1.22%
Carnival (CCL) 3,412.00p -1.22%
ITV (ITV) 141.00p -0.81%
InterContinental Hotels Group (IHG) 4,806.00p -0.58%
Flutter Entertainment (FLTR) 8,888.00p -0.13%
Kingfisher (KGF) 206.90p -0.05%
GlaxoSmithKline (GSK) 1,822.80p -0.01%
BT Group (BT.A) 171.06p 0.04%
FTSE 250 - Risers
Renishaw (RSW) 4,048.00p 7.95%
Hilton Food Group (HFG) 1,088.00p 5.22%
IP Group (IPO) 73.40p 4.71%
Virgin Money UK (VMUK) 173.30p 4.08%
Tullow Oil (TLW) 51.94p 3.88%
Hill & Smith Holdings (HILS) 1,472.00p 3.81%
Safestore Holdings (SAFE) 797.00p 3.78%
McCarthy & Stone (MCS) 156.30p 3.58%
Micro Focus International (MCRO) 1,115.40p 3.55%
Spirent Communications (SPT) 240.00p 3.45%
FTSE 250 - Fallers
Finablr (FIN) 95.00p -27.37%
Marston's (MARS) 111.00p -5.29%
888 Holdings (888) 137.80p -2.82%
Cairn Energy (CNE) 177.30p -2.37%
Hyve Group (HYVE) 102.20p -2.29%
Galliford Try (GFRD) 131.50p -2.13%
Mediclinic International (MDC) 391.70p -2.08%
Aston Martin Lagonda Global Holdings (AML) 421.80p -1.70%
Playtech (PTEC) 360.90p -1.47%
Marks & Spencer Group (MKS) 184.55p -1.44%