London midday: Stocks flatten out after borrowing figures; Acacia shines bright
London stocks had flattened out by midday on Friday as investors digested news that public sector net borrowing in the UK rose sharply in June.
The FTSE 100 was steady at 7,490.22, while the pound was down 0.1% against the dollar at 1.2541 and 0.3% firmer versus the euro at 1.1161.
Stocks had kicked the session off firmly in the green amid rising expectations of a rate cut from the Fed after New York Fed President John Williams said in a speech on Thursday that policymakers could not wait for economic disaster to strike before adding stimulus. In addition, Fed Vice Chairman Clarida said the central bank needs to act quickly when the need for stimulus arises.
However, a spokesperson for the Fed was quick to clarify Williams comments. Speaking to CNBC, he said: "This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting."
CMC Markets analyst Michael Hewson said: "While it is looking increasingly certain that the Fed will probably cut rates this month, it is stretching credibility to suggest that they will cut by 50 basis points, something markets are assigning an almost 50% probability of happening.
"Quite simply the data in no way supports such drastic action and while one could also argue the case that a 25bp cut isn’t needed either, it would now be major surprise were the Fed not to act, by at least shaving 25 points of the Fed funds rate on the 31 July."
Borrowing figures from the Office for National Statistics took the early shine off markets as they showed an unexpected increased to £7.2bn in June - the highest level for that month in four years.
Public sector net borrowing excluding public sector banks increased by £3.8bn from June 2018 as the government paid more to borrow and increased public spending.
The £7.2bn figure for June 2019 was the highest June borrowing since 2015 and was well ahead of economists' average forecast of £3.9bn. The government paid £2.1bn more in interest but excluding that volatile measure and extra EU payments the UK still borrowed £1.3bn more than a year earlier.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the underlying figures were "not pretty" and suggested the economy was flagging.
In London equity markets, miners were on the rise as copper prices advanced, with Antofagasta, Anglo American and Rio Tinto all higher.
Acacia Mining shares surged as it agreed to be bought by Barrick Gold in a deal that values the UK gold miner at about £951m and concludes two months of fractious talks between the companies.
Aston Martin Lagonda was a high riser as its biggest shareholder, Strategic European Investment Group, offered to buy a further 3% stake in the car maker.
On the downside, advertising giant WPP was the standout loser on the top-flight index after French peer Publicis cut its revenue target for the year.
Merchant bank Close Brothers was weaker as it said it has continued to deliver a “solid” performance amid “mixed” trading conditions, with loan book growth in its banking division but lower trading volumes in its securities arm.
Paper and packaging group DS Smith retreated as the Competition and Markets Authority said Liqui-Box’s proposed takeover of its rigid and flexible packaging business could leave food and drink suppliers worse off. The two companies will now need to address the CMA’s concerns or the deal will be referred for an in-depth investigation.
Paper companies were weaker generally, with Smurfit Kappa and Mondi also down after Finnish paper manufacturer Stora Enso reported a decline in second-quarter profits amid weaker demand.
In broker note action, Superdry and Ted Baker were initiated at ‘overweight’ and ‘equalweight’, respectively, by Morgan Stanley, while Asos was cut to ‘equalweight’ at Barclays.
EasyJet was boosted to ‘hold’ at HSBC.
FTSE 100 - Risers
TUI AG Reg Shs (DI) (TUI) 811.00p 6.04%
Ocado Group (OCDO) 1,163.50p 2.02%
Antofagasta (ANTO) 913.60p 1.67%
Sainsbury (J) (SBRY) 204.00p 1.39%
Johnson Matthey (JMAT) 3,087.00p 1.35%
Experian (EXPN) 2,410.00p 1.26%
Anglo American (AAL) 2,211.50p 1.24%
Rio Tinto (RIO) 4,837.00p 1.19%
Just Eat (JE.) 623.20p 1.14%
Vodafone Group (VOD) 128.32p 1.12%
FTSE 100 - Fallers
WPP (WPP) 905.80p -3.41%
Burberry Group (BRBY) 2,299.00p -1.42%
Berkeley Group Holdings (The) (BKG) 3,775.00p -1.41%
St James's Place (STJ) 1,096.50p -1.35%
Schroders (SDR) 2,932.00p -1.21%
Legal & General Group (LGEN) 268.25p -1.16%
Lloyds Banking Group (LLOY) 56.77p -1.08%
Smith (DS) (SMDS) 359.70p -1.02%
SEGRO (SGRO) 747.80p -1.01%
Royal Bank of Scotland Group (RBS) 228.40p -1.00%
FTSE 250 - Risers
Acacia Mining (ACA) 223.00p 19.51%
Aston Martin Lagonda Global Holdings (AML) 999.72p 3.81%
Kaz Minerals (KAZ) 564.00p 3.30%
Centamin (DI) (CEY) 119.18p 3.18%
Entertainment One Limited (ETO) 440.60p 2.70%
Hochschild Mining (HOC) 209.93p 2.30%
Dunelm Group (DNLM) 910.87p 2.17%
Greencore Group (GNC) 228.50p 2.05%
Galliford Try (GFRD) 642.00p 1.90%
Royal Mail (RMG) 220.17p 1.88%
FTSE 250 - Fallers
Close Brothers Group (CBG) 1,402.00p -3.38%
Moneysupermarket.com Group (MONY) 360.80p -2.22%
PPHE Hotel Group Ltd (PPH) 1,860.00p -2.11%
Metro Bank (MTRO) 464.01p -2.07%
TalkTalk Telecom Group (TALK) 106.98p -1.85%
Intu Properties (INTU) 79.59p -1.77%
Bovis Homes Group (BVS) 1,039.51p -1.66%
TBC Bank Group (TBCG) 1,530.00p -1.54%
Hammerson (HMSO) 270.60p -1.46%
Redrow (RDW) 542.00p -1.45%