London midday: Stocks extend gains; services data rounds off trio of data misses
London stocks had extended gains by midday on Wednesday, with a weaker pound lending support as investors mulled a trio of dismal UK PMIs.
The FTSE 100 was up 0.8% at 7,620.48, trading at a 10-month high, while the pound was down 0.2% against the dollar and the euro at 1.2574 and 1.1140, respectively, remaining under pressure after data revealed that activity in the services sector pretty much ground to a halt in June.
Sterling was weaker before the release, having taken a hit after Bank of England Governor Mark Carney warned that trade tensions and a potential no-deal Brexit were growing risks to the UK economy, raising expectations of an interest rate cut.
The IHS/Markit CIPS services purchasing managers' business activity index fell to 50.2 from 51.0 in May, missing expectations for an unchanged reading a hitting a three-month low. The index came in just above the 50 mark that separates contraction from expansion.
Subdued activity was attributed to sluggish domestic economic conditions and greater risk aversion amid ongoing Brexit uncertainty. Reflecting this, there was a fractional decline in new business received by service sector companies, while lower volumes of new work have now been recorded in five of the past six months.
The composite index, which includes the construction and manufacturing sectors, fell to 49.2 in June from 50.7 in May, signalling a drop in overall private sector business activity for the first time in nearly three years.
Chris Williamson, chief business economist at IHS Markit, said: "The near-stagnation of the services sector in June is one of the worst performances seen over the past decade and comes on the heels of steep declines in both manufacturing and construction.
"Collectively, the PMI surveys indicate that the economy has slipped into contraction for the first time since July 2016, suffering the second-steepest fall in output since the global financial crisis in April 2009.
The services PMI completed a trifecta of poor figures so far this week.On Monday, data showed the UK manufacturing sector slumped in June as a slowing global economy and Brexit uncertainty took their toll. The IHS Markit CIPS manufacturing PMI fell to 48.0 from 49.4 in May, marking the lowest reading since February 2013 and the third consecutive month the index had fallen. It was also below forecasts for a reading of about 49.5.
On Tuesday, meanwhile, it emerged that UK construction output plunged to a 10-year low in June. The IHS Markit CIPS construction total activity index dropped to 41.3 last month from 48.6 in May, undershooting expectations of 49.2.
Still, Capital Economics said that given the falls in the manufacturing and construction indices, the smaller drop in the services PMI "was a bit of a relief".
"Indeed, it’s only a little below the average reading of 50.5 over the past six months," said UK economist Andrew Wishart. "That said, based on past form it still suggests the sector stagnated in Q2 following a 0.4% expansion in Q1."
In equity markets, Flutter Entertainment surged to the top of the FTSE 100, with traders pointing to speculation about a possible buyout.
Elsewhere, JD Sports Fashion rallied as it expressed confidence that it will at least meet current consensus market expectations for full-year headline pre-tax profit. In a statement ahead of its annual general meeting, the retailer said it had continued to achieve "encouraging" like-for-like sales growth in its core sports fashion in the UK and internationally.
Student accommodation provider Unite advanced after agreeing to buy Liberty Living from the Canada Pension Plan Investment Board (CPPIB) in a £1.4bn cash and share deal.
Cybersecurity companies Avast and Sophos got a boost from news that Broadcom Inc. is in advanced talks to buy cybersecurity firm Symantec Corp.
On the downside, Sainsbury's fell as the supermarket chain posted a drop in first-quarter sales and warned that retail markets remain "highly competitive".
Serco was in the red after agreeing to pay a £19.2m fine and £3.7m in costs for overcharging on a UK government contract, while Electrocomponents shares dropped as it reported a slowdown in quarterly sales growth.
Market Movers
FTSE 100 (UKX) 7,620.48 0.81%
FTSE 250 (MCX) 19,785.16 0.64%
techMARK (TASX) 3,757.42 1.33%
FTSE 100 - Risers
Flutter Entertainment (FLTR) 6,870.00p 12.00%
Fresnillo (FRES) 895.60p 3.66%
JD Sports Fashion (JD.) 621.40p 3.15%
British American Tobacco (BATS) 2,989.50p 3.07%
Halma (HLMA) 2,083.00p 2.61%
International Consolidated Airlines Group SA (CDI) (IAG) 488.10p 2.61%
United Utilities Group (UU.) 813.80p 2.60%
Rolls-Royce Holdings (RR.) 879.20p 2.49%
Imperial Brands (IMB) 1,984.04p 2.43%
Bunzl (BNZL) 2,159.00p 2.32%
FTSE 100 - Fallers
Sainsbury (J) (SBRY) 196.95p -1.28%
Anglo American (AAL) 2,238.00p -1.19%
BP (BP.) 552.00p -0.70%
Glencore (GLEN) 278.07p -0.51%
Antofagasta (ANTO) 920.40p -0.26%
Royal Dutch Shell 'A' (RDSA) 2,587.50p -0.21%
Croda International (CRDA) 4,878.00p -0.20%
Morrison (Wm) Supermarkets (MRW) 205.20p -0.15%
Phoenix Group Holdings (PHNX) 718.10p -0.14%
Barclays (BARC) 153.66p -0.08%
FTSE 250 - Risers
Funding Circle Holdings (FCH) 134.14p 16.03%
Sophos Group (SOPH) 428.40p 9.51%
William Hill (WMH) 164.15p 4.75%
Ted Baker (TED) 835.00p 4.38%
GVC Holdings (GVC) 694.20p 4.27%
Synthomer (SYNT) 386.20p 4.04%
Avast (AVST) 317.60p 3.45%
Unite Group (UTG) 1,029.00p 3.16%
Pennon Group (PNN) 783.41p 2.94%
Intu Properties (INTU) 76.58p 2.57%
FTSE 250 - Fallers
Petrofac Ltd. (PFC) 417.10p -2.61%
Syncona Limited NPV (SYNC) 220.68p -2.57%
Vivo Energy (VVO) 125.00p -2.34%
Network International Holdings (NETW) 574.00p -2.05%
Diploma (DPLM) 1,529.00p -1.99%
Hastings Group Holdings (HSTG) 194.00p -1.92%
Bakkavor Group (BAKK) 118.10p -1.91%
PayPoint (PAY) 926.75p -1.72%
Premier Oil (PMO) 74.70p -1.71%
Weir Group (WEIR) 1,526.50p -1.52%