London midday: Stocks in the red as investors mull services data
London stocks had fallen into the red by midday on Friday, giving back the previous session’s gains as investors mulled over the latest reading on the UK services sector.
The FTSE 100 was down 0.8% at 6,189.44, having risen sharply on Thursday following the release of a better-than-expected US non-farm payrolls report.
With US markets closed for the Independence Day holiday, volatility and volumes were set to be low for the rest of the session.
Market commentators pointed to ongoing concerns about rising coronavirus cases in the US.
Neil Wilson, chief market analyst at Markets.com, said: "The number of cases in the US continue to surge - more than 55k in a single day the latest total, with the governor of Texas now mandating the wearing of face masks."
On the macroeconomic front, investors digested the latest reading on the Chinese services sector, which showed it grew at the fastest rate in more than a decade in June.
The Caixin/Markit services purchasing managers’ index rose to 58.4 from 55.0 in May, coming in comfortably ahead of consensus expectations for a reading of 53.2. This marked the highest reading since April 2010.
A level above 50.0 signals expansion, while a reading below indicates contraction.
On home shores, a survey released earlier showed the downturn in the UK services sector eased in June.
The IHS/Markit CIPS services purchasing managers’ index rose to 47.1 from 29.0 in May, marking its highest level in four months and coming in a touch ahead of the flash estimate of 47.0. It was also well above the survey low of 13.4 recorded in April, but below the 50.0 mark that separates contraction from expansion.
Around 33% of those surveyed reported a decline in business activity in June, while 28% signalled an expansion. The proportion of service providers experiencing a fall in business activity eased from 54% in May and 79% in April.
Survey respondents again pointed to "highly subdued" demand and disruptions related to the Covid-19 pandemic as factors constricting business activity in June. However, there were also reports that an easing of lockdown measures and reopening of the UK economy had a favourable impact on business activity.
But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, argued that the PMI is a "pretty meaningless" indicator right now.
"The composite PMI neither is a useful indicator of month-to-month growth in GDP nor its level at present. The sub-50 reading technically implies that output was lower in June in May. But that is improbable, given that lockdown rules were loosened further in June and a wide variety of other data sources, from energy consumption to road usage, indicate that activity recovered."
Elsewhere, the latest survey from GfK showed consumer confidence was improving a little as more businesses prepare to reopen after the coronavirus lockdown, but the mood remains fragile.
In a flash report using data collected between 18 and 26 June, GfK said its long-running consumer confidence index has risen by three points over the past two weeks to -27 from -30. Four of the five measures of the index were higher.
In equity markets, retailer Next was under the cosh as Goldman Sachs downgraded its stance on the shares to ‘sell’ from ‘neutral’. It said the company is working hard to offset a structural shift to more intense online competition, but this is likely to result in no revenue growth.
Aerospace and defence company Rolls-Royce was the worst performer on the top-flight index, with banks and housebuilders also under pressure.
On the upside, home emergency repairs and improvements business Homeserve was the standout gainer on the FTSE 100 on the back of an upbeat note from Berenberg, which said the company offers investors a highly attractive business model. "It is a growing, non-cyclical, recurring, high-margin and cash-generative business," the bank said, adding that Homeserve had shown its early resilience to the pandemic.
Commercial property owner Land Securities rose as it said it planned to reinstate dividends after half year results in November as tenants reopened premises after the easing of coronavirus lockdowns.
Rank Group was higher as it said it will begin reopening its Mecca bingo clubs from Saturday but warned that underlying operating profit for the year ended 30 June is expected to be at the lower end of guidance.
Outside the FTSE 350, shares of CMC Markets surged after the online trading platform said 2021 net operating income will exceed the upper end of current market consensus.
FTSE 100 - Risers
Homeserve (HSV) 1,304.00p 2.11%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,626.00p 1.63%
Land Securities Group (LAND) 584.20p 1.60%
Smurfit Kappa Group (SKG) 2,584.00p 1.41%
Whitbread (WTB) 2,380.00p 1.32%
Experian (EXPN) 2,925.00p 1.32%
JD Sports Fashion (JD.) 659.20p 1.07%
Mondi (MNDI) 1,499.00p 0.98%
Scottish Mortgage Inv Trust (SMT) 856.00p 0.94%
Smiths Group (SMIN) 1,399.00p 0.87%
FTSE 100 - Fallers
Rolls-Royce Holdings (RR.) 279.70p -4.38%
Taylor Wimpey (TW.) 139.20p -2.83%
Next (NXT) 4,906.00p -2.47%
Lloyds Banking Group (LLOY) 31.08p -2.43%
RSA Insurance Group (RSA) 413.10p -2.43%
Standard Chartered (STAN) 431.50p -2.42%
BT Group (BT.A) 110.75p -2.21%
Barclays (BARC) 115.32p -2.19%
Burberry Group (BRBY) 1,639.50p -2.15%
Barratt Developments (BDEV) 494.10p -2.12%
FTSE 250 - Risers
PureTech Health (PRTC) 291.00p 10.65%
Essentra (ESNT) 309.40p 5.60%
ICG Enterprise Trust (ICGT) 762.00p 4.10%
Trainline (TRN) 450.00p 3.45%
Telecom Plus (TEP) 1,500.00p 3.16%
Spirent Communications (SPT) 250.50p 2.87%
Oxford Biomedica (OXB) 757.00p 2.85%
IntegraFin Holding (IHP) 477.50p 2.36%
IWG (IWG) 277.00p 2.21%
Plus500 Ltd (DI) (PLUS) 1,353.50p 2.19%
FTSE 250 - Fallers
Aston Martin Lagonda Global Holdings (AML) 45.94p -7.64%
Mitchells & Butlers (MAB) 182.20p -5.40%
Meggitt (MGGT) 310.70p -4.10%
Virgin Money UK (VMUK) 95.04p -3.77%
Carnival (CCL) 987.80p -3.68%
Cineworld Group (CINE) 62.34p -3.47%
Provident Financial (PFG) 166.90p -3.30%
Ferrexpo (FXPO) 168.40p -3.27%
Capita (CPI) 43.10p -3.23%
Wood Group (John) (WG.) 193.35p -3.11%