London midday: Stocks extend gains as Pershing Square, Shell rally
London stocks had extended gains by midday on Tuesday, recovering from heavy losses in the previous session with solid performances from the likes of Pershing Square, IAG and Shell helping to underpin markets.
The FTSE 100 was up 1.2% at 6,986.04.
Russ Mould, investment director at AJ Bell, said: "Bargain hunters appeared to be out in force on Tuesday as the FTSE 100 bounced back from a torrid start to the week.
"The miners, scarred by heavy selling on Monday, eked out a recovery while British Airways owner International Consolidated Airlines continued the ascent which begin yesterday afternoon when the US lifted travel restrictions on fully vaccinated UK and EU visitors.
"The major catalyst for market volatility of late, fears about the fall-out from a potential collapse of Chinese property developer Evergrande, haven’t disappeared though.
"Evergrande is due to make a debt repayment on Thursday and this event could be the next major test of investors’ resolve.
"The challenge for the markets is trying to guess how Beijing might react, particularly after its notably strident approach in recent months when it comes to the technology industry. Will it be similarly strict with the property sector?
"Before Thursday there is also the small matter of the latest US Federal Reserve meeting and the question of whether recent events will lead chair Jay Powell and his colleagues to rethink their plans for tapering financial stimulus."
On the macro front, figures released earlier by the Office for National Statistics showed that public borrowing fell in August as the economy recovered but higher inflation pushed up the cost of public debt.
Public sector net borrowing was £20.5bn, down by £5.5bn from a year earlier. The reading was slightly lower than the £21.6bn forecast by the Office for Budget Responsibility but it was well ahead of economists' average £15.6bn estimate in a Reuters poll.
Interest paid on public debt rose to £6.3bn from £2.9bn a year earlier, outstripping the OBR's £1.6bn forecast. That result will fuel warnings that the government may not be able to borrow cheaply in future.
Separately, a survey showed that UK manufacturing orders rose to their highest for at least 44 years in September but factories struggled to meet demand because of supply problems.
Total order books improved further after a strong result in August to post the highest result since the Confederation of British Industry's survey started in 1977. Export orders improved to their strongest since March 2019, the survey of 273 firms found.
But output growth in the three months to September slowed for the second month in a row while remaining firm by historical standards. Out of 17 sectors, 11 showed growth with production led by food, drink and tobacco.
UK companies have been affected by supply chain problems including rising raw material prices, component scarcity and a shortage of lorry drivers and other workers.
Anna Leach, the CBI's deputy chief economist, said: "Today’s survey highlights how amidst a variety of supply challenges, companies are beginning to struggle to meet high demand. Despite close to half of manufacturers surveyed reporting order books above normal, output growth has slowed sharply, albeit remaining relatively robust.
"As well as skill and labour shortages, sharply increasing material costs and shortages of key components, producers now face rocketing energy prices."
In equity markets, Pershing Square was the top performer on the FTSE 100 after a successful Amsterdam stock market debut for Universal Music Group, which it has a 10% stake in.
IAG racked up healthy gains for the second day running on US travel news, while Shell advanced after announcing late on Monday that it was selling the entirety of its Permian Basin assets to ConocoPhillips for $9.5bn in cash.
Transport operators National Express and Stagecoach both rallied after confirming they’re in talks about a possible merger. Under the terms of the potential combination, Stagecoach shareholders would receive 0.36 new National Express ordinary shares for each of their ordinary shares, resulting in them owning around 25% of the combined group.
Oxford Instruments gained after it said trading for the full year was set to be "slightly" ahead of expectations amid a healthy pipeline.
On the downside, DIY retail group Kingfisher fell after it said third quarter like-for-like sales to September 18 were down 0.6% year-on-year as it reported a surge in interim profits and revenue along with a £300m share buyback.
Compass was also weaker even as the catering group said its fourth-quarter performance was ahead of guidance as diners returned to sports and leisure venues and schools and colleges reopened.
Market Movers
FTSE 100 (UKX) 6,986.04 1.19%
FTSE 250 (MCX) 23,556.75 0.66%
techMARK (TASX) 4,695.76 0.77%
FTSE 100 - Risers
Pershing Square Holdings Ltd NPV (PSH) 2,745.00p 5.78%
Antofagasta (ANTO) 1,416.50p 4.58%
Royal Dutch Shell 'A' (RDSA) 1,500.00p 4.40%
Royal Dutch Shell 'B' (RDSB) 1,493.40p 4.39%
BHP Group (BHP) 1,907.00p 3.43%
International Consolidated Airlines Group SA (CDI) (IAG) 171.02p 2.91%
BP (BP.) 311.90p 2.70%
Rolls-Royce Holdings (RR.) 118.42p 2.35%
Rio Tinto (RIO) 4,822.50p 2.30%
Prudential (PRU) 1,352.50p 2.11%
FTSE 100 - Fallers
Kingfisher (KGF) 345.80p -6.03%
Compass Group (CPG) 1,451.50p -2.32%
JD Sports Fashion (JD.) 1,092.00p -1.31%
Polymetal International (POLY) 1,334.00p -0.85%
B&M European Value Retail S.A. (DI) (BME) 591.20p -0.81%
Schroders (SDR) 3,566.00p -0.47%
Flutter Entertainment (CDI) (FLTR) 14,695.00p -0.44%
Reckitt Benckiser Group (RKT) 5,900.00p -0.42%
Berkeley Group Holdings (The) (BKG) 4,514.00p -0.42%
Meggitt (MGGT) 737.60p -0.32%
FTSE 250 - Risers
National Express Group (NEX) 240.40p 7.80%
Airtel Africa (AAF) 99.80p 5.00%
Computacenter (CCC) 2,922.00p 4.36%
Ferrexpo (FXPO) 325.80p 3.89%
Reach (RCH) 367.00p 3.82%
Oxford Instruments (OXIG) 2,455.00p 3.81%
FirstGroup (FGP) 89.00p 3.31%
Energean (ENOG) 818.50p 3.28%
Spectris (SXS) 4,032.00p 3.25%
Chrysalis Investments Limited NPV (CHRY) 266.00p 3.10%
FTSE 250 - Fallers
SSP Group (SSPG) 275.00p -2.52%
easyJet (EZJ) 638.00p -2.48%
Petropavlovsk (POG) 21.22p -1.94%
BH Macro Ltd. GBP Shares (BHMG) 3,610.00p -1.63%
Softcat (SCT) 2,180.00p -1.54%
Dunelm Group (DNLM) 1,438.00p -1.51%
Watches of Switzerland Group (WOSG) 994.00p -1.19%
Hammerson (HMSO) 32.22p -1.17%
BB Healthcare Trust (Red) (BBH) 196.60p -0.91%
Redrow (RDW) 701.80p -0.90%