London midday: Banks pace gains as Barclays results impress
London stocks were firmly in the black by midday on Friday, with banks pacing the advance after well-received results from Barclays, as investors shrugged off news that the UK’s economic recovery was stalling.
The FTSE 100 was up 1.7% at 5,882.18, extending earlier gains.
Banks were the standout performers, with Barclays sharply higher after it reported better-than-expected third-quarter profits on the back of a strong performance from its consumer businesses as bad loan provisions fell sharply from the previous three months. The bank posted a pre-tax profit £1.1bn for the three months to September, compared with £200m a year ago and double analysts’ forecasts.
Other banks followed suit, with Lloyds, Standard Chartered, HSBC and NatWest all up.
On the macroeconomic front, news was mixed.
Figures released earlier by the Office for National Statistics showed retail sales rose in September for the fifth consecutive month as they continue to recover from the Covid-19 slump. Sales increased 1.5% on the month in September, beating expectations for a 0.4% increase.
On the year, sales were up 4.7%, coming in ahead of expectations for a 2.7% jump.
When compared with pre-pandemic levels in February, total retail sales were 3.9% and 5.5% higher in value and volume terms, respectively.
In the three months to September, retail sales volumes rose 17.4% compared to the previous three months. This marked the largest quarterly increase on record as sales picked up from record-low levels earlier in the year.
Despite the solid figures, analysts were cautious over the outlook. ING economist James Smith said the UK’s "remarkable recovery" was set to stall.
"Retail sales continue to exceed their pre-virus levels, but renewed closures in Wales and the knock-on effect of tiered restrictions elsewhere suggest revenues will come under renewed pressure on the high street, as we edge towards the key Christmas trading period," he said.
Meanwhile, Howard Archer, chief economic adviser to EY Item Club, said: "Following the strong third quarter bounce back, the outlook for retail sales and consumer spending looks more challenging in the near term at least. This reflects increased restrictions on activity, possible markedly rising unemployment, limited earnings and mounting consumer caution."
In addition, a survey from IHS/Markit CIPS showed the UK’s economic recovery stalled in October amid rising coronavirus cases and increased restrictions, with growth in the services sector slowing considerably.
The flash composite purchasing managers’ index - which measures activity in manufacturing and services - fell to 52.9 from 56.5 in September, coming in below consensus expectations of 54.0. The composite peaked at 59.1 in August.
A reading above 50.0 indicates expansion, while a reading below signals contraction.
The services PMI edged down to 52.3 in October from 56.1 the month before. Economists had been expecting a reading of 53.9. This was also below August's recent peak of 58.8 and pointed to the worst performance for the sector since June.
The manufacturing PMI declined to 53.3 from 54.1, versus expectations for a reading of 53.1.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the drop in the flash composite PMI to near the 50-mark that theoretically denotes no change in GDP adds to evidence that the economic recovery has ground to a halt.
"The second wave of Covid-19 is the obvious driver of the slowdown, though the recovery likely would have decelerated anyway, given that the burst of pent-up demand for services after the lockdown was lifted in July never was likely to be sustained.
"Note too that the PMI is a diffusion index which does not capture the magnitude of changes in demand at businesses. It will be too upbeat if, as seems to be happening now, most firms are growing modestly but a few in the consumer services sector are experiencing dramatic falls in demand."
Market Movers
FTSE 100 (UKX) 5,882.18 1.67%
FTSE 250 (MCX) 18,091.07 1.10%
techMARK (TASX) 3,787.23 1.24%
FTSE 100 - Risers
Barclays (BARC) 112.82p 8.19%
Rolls-Royce Holdings (RR.) 239.80p 5.69%
Lloyds Banking Group (LLOY) 29.41p 5.36%
Standard Chartered (STAN) 401.30p 4.70%
HSBC Holdings (HSBA) 320.35p 4.37%
NATWEST GROUP PLC ORD 100P (NWG) 123.70p 3.91%
Royal Dutch Shell 'B' (RDSB) 948.70p 3.73%
Smiths Group (SMIN) 1,417.50p 3.62%
Melrose Industries (MRO) 132.90p 3.34%
Rentokil Initial (RTO) 555.00p 3.31%
FTSE 100 - Fallers
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,224.00p -1.07%
InterContinental Hotels Group (IHG) 4,218.00p -1.06%
London Stock Exchange Group (LSE) 8,470.00p -0.54%
Hargreaves Lansdown (HL.) 1,404.50p -0.46%
Pearson (PSON) 519.20p -0.35%
Unilever (ULVR) 4,719.00p -0.04%
Hikma Pharmaceuticals (HIK) 2,578.00p 0.04%
Relx plc (REL) 1,637.50p 0.06%
Admiral Group (ADM) 2,787.00p 0.18%
Sage Group (SGE) 700.40p 0.26%
FTSE 250 - Risers
Shaftesbury (SHB) 451.40p 7.48%
AO World (AO.) 362.00p 6.31%
Petrofac Ltd. (PFC) 123.45p 6.15%
Wood Group (John) (WG.) 231.50p 5.71%
National Express Group (NEX) 155.70p 5.63%
Provident Financial (PFG) 217.00p 5.24%
Aggreko (AGK) 475.00p 4.63%
Carnival (CCL) 1,023.50p 4.40%
Kainos Group (KNOS) 1,358.00p 4.30%
Ibstock (IBST) 177.60p 4.29%
FTSE 250 - Fallers
Airtel Africa (AAF) 62.00p -4.32%
Rank Group (RNK) 86.20p -3.58%
Computacenter (CCC) 2,418.00p -3.28%
Apax Global Alpha Limited (APAX) 161.20p -2.07%
C&C Group (CCR) 175.20p -1.79%
Domino's Pizza Group (DOM) 319.40p -1.42%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,224.00p -1.07%
Greencore Group (GNC) 102.00p -0.87%
Watches of Switzerland Group (WOSG) 409.50p -0.85%
Indivior (INDV) 99.50p -0.70%