London midday: FTSE maintains gains as investors mull services data
London stocks were still on the front foot by midday on Thursday - albeit lagging their European peers - as investors mulled over the latest reading on the UK services sector.
The FTSE 100 was up 0.8% at 5,987.84.
IG analyst Chris Beauchamp said: "News that France is throwing an additional €100 billion at its economy, and comments about the strength of the euro from ECB policymakers, have combined to provide fresh impetus to the rally in European stocks this morning.
"Equities continue to exhibit notable strength as they rise heedless of the ongoing tick higher in virus cases and signs that the economic rebound is slowing. With the US also discussing fresh attempts to provide cash for workers there is additional hope that governments will continue down the path of stimulus in order to cushion the economy from renewed lockdowns or viral outbreaks. The path of least resistance for stocks appears to be higher for the time being, and the signs of weakness in the euro and sterling will be manna from heaven for investors this side of the Atlantic, who have seen US stocks breeze higher while European markets struggle to make much headway."
On home shores, data showed the services sector expanded rapidly in August, although rising job cuts raised fears the recovery could be short-lived.
The IHS Markit/CIPS services purchasing managers' index rose to 58.5 from 56.5 in July as businesses and consumers spent after the end of coronavirus lockdowns. A score of 50 separates expansion from contraction.
The result was the strongest since April 2015, helped by a busy housing market supported by a stamp duty holiday, the government's Eat Out to Help Out restaurant subsidy and a recovery in business services.
But the survey showed signs of excess capacity as work backlogs reduced and a third of respondents reported reductions to staffing levels. Employers shed jobs at the steepest pace since May as the government's furlough programme began to wind down.
Chris Williamson, chief business economist at IHS Markit, said: "A further surge in service sector business activity in August adds to signs that the economy is enjoying a mini boom as business re-opens after the lockdowns, but the concern is that the rebound will fade as quickly as it appeared.
"The current expansion is built on something of a false reality, with the economy temporarily supported by measures including the furlough and Eat Out to Help Out schemes. These props are being removed."
In equity markets, Melrose Industries rallied after saying it planned big job cuts at its GKN Aerospace business as the industrial turnaround company reported a first-half loss of £560m.
The company's pre-tax loss for the six months to the end of June widened from £131m a year earlier as revenue dropped to £4.1bn from £5.6bn. Melrose said GKN's sales were expected to fall by up to 30% in 2020 and that it would make a "significant reduction" to the division's global workforce in the second half.
Analysts said the results were better than feared and pointed to the fact Melrose highlighted encouraging signs of recovery over the summer at its automotive and powder metallurgy businesses.
Engine maker Rolls-Royce gained after winning a contract worth many millions of euros to provide the neutron flux monitoring system for two nuclear reactors under construction in China.
Capita continued to advance despite saying it had not received an offer from private equity firm CVC Capital Partners. This is Money had reported that CVC was eyeing up the outsourcer following an 80% slump in its share price so far this year.
On the downside, Admiral, BHP and Antofagasta were all weaker as their stock went ex-dividend, while retailer Next was knocked lower by a downgrade to ‘underweight’ at Morgan Stanley.
Market Movers
FTSE 100 (UKX) 5,987.84 0.79%
FTSE 250 (MCX) 17,836.51 0.75%
techMARK (TASX) 3,856.29 1.08%
FTSE 100 - Risers
Melrose Industries (MRO) 113.50p 12.94%
ITV (ITV) 64.14p 8.56%
International Consolidated Airlines Group SA (CDI) (IAG) 215.30p 6.11%
Rolls-Royce Holdings (RR.) 230.20p 5.79%
Compass Group (CPG) 1,291.50p 5.26%
Whitbread (WTB) 2,596.00p 5.10%
British Land Company (BLND) 366.70p 4.59%
JD Sports Fashion (JD.) 743.80p 4.58%
Burberry Group (BRBY) 1,513.50p 3.95%
BT Group (BT.A) 105.50p 3.74%
FTSE 100 - Fallers
BHP Group (BHP) 1,685.40p -3.15%
Admiral Group (ADM) 2,600.00p -3.02%
Next (NXT) 5,884.00p -2.42%
DCC (DCC) 6,464.00p -1.91%
Polymetal International (POLY) 1,927.00p -1.83%
Ocado Group (OCDO) 2,480.00p -1.74%
Reckitt Benckiser Group (RB.) 7,432.00p -1.41%
Evraz (EVR) 330.00p -1.35%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,272.00p -0.84%
Scottish Mortgage Inv Trust (SMT) 962.00p -0.72%
FTSE 250 - Risers
National Express Group (NEX) 126.30p 10.69%
Capita (CPI) 32.10p 9.56%
CLS Holdings (CLI) 209.50p 6.67%
easyJet (EZJ) 628.40p 6.40%
Equiniti Group (EQN) 117.00p 6.36%
Airtel Africa (AAF) 61.90p 6.36%
Network International Holdings (NETW) 410.00p 6.33%
Go-Ahead Group (GOG) 685.00p 6.04%
TUI AG Reg Shs (DI) (TUI) 342.30p 5.98%
Micro Focus International (MCRO) 308.60p 5.90%
FTSE 250 - Fallers
Hammerson (HMSO) 276.45p -5.33%
Pershing Square Holdings Ltd NPV (PSH) 2,080.00p -5.02%
Barr (A.G.) (BAG) 399.00p -5.00%
Greencoat UK Wind (UKW) 135.20p -4.38%
4Imprint Group (FOUR) 1,994.00p -4.13%
PureTech Health (PRTC) 274.50p -4.02%
Energean (ENOG) 526.00p -3.84%
Computacenter (CCC) 2,168.00p -3.64%
Clarkson (CKN) 2,400.00p -2.83%
Avon Rubber (AVON) 3,745.00p -2.60%