London midday: Stocks pare gains as pound jumps after CBI survey
London stocks had pared gains by midday on Wednesday as sterling was boosted by the latest manufacturing survey from the Confederation of British Industry, with losses for the likes of TUI, Antofagasta and Burberry weighing on the top-flight index.
The FTSE 100 was down 0.1% at 7,606.45, reversing earlier small gains to trade just a touch lower, but with investors largely shrugging off concerns about the spread of coronavirus.
CMC Markets analyst David Madden said: "The Chinese government’s response to the health situation seems to be more upfront than their handling of the SARS crisis, so traders aren’t as fearful. Huge numbers of people are expected to be on the move during the Lunar New Year holiday, so the situation could worsen, and that is why some traders aren’t overly bullish this morning."
Sterling was up 0.3% against the dollar at 1.3090 after the latest survey from the CBI showed that optimism in the manufacturing sector improved at its fastest pace in the three months to January since 2014. The CBI’s manufacturing optimism gauge rose to +23 in January from -44 in October.
CBI deputy chief economist Anna Leach said: "It’s clear manufacturers are entering the new year with a spring in their step. Firms are now planning to invest more in plants and machinery, which will ultimately help increase capacity and output.
"However, this boost to sentiment belies poor trading conditions over the past quarter, with output and orders still declining."
Capital Economics said: "The rebound in the main balances of the CBI industrial trends survey in January offers further evidence that sentiment has taken an upward turn after the general election. This should help to convince the MPC to not cut rates at its meeting at the end of the month."
Elsewhere, data from the Office for National Statistics showed that public borrowing eased in December, beating analyst expectations.
Public sector net borrowing excluding public sector banks (PSNB ex) was £4.8bn in December, around £0.2bn less than December 2018. Analysts had been looking for a figure closer to £5.3bn.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The latest public finance data continue to suggest that the economy was sluggish, but did not grind to a halt last year."
On the corporate front, housebuilder Berkeley Group was the standout gainer after saying it will return £1bn to shareholders over the next two years, which is a £455m increase. Other housebuilders followed suit, with Taylor Wimpey and Persimmon also higher.
Software company Sage followed close behind after it said first-quarter recurring revenue increased 10.7% year on year to £410m, underpinned by software subscription growth of 24.8% to £286m as it continued to focus on migrating existing customers and attracting new customers to subscription and the cloud.
Credit-checking firm Experian was lifted by an upgrade to ‘overweight’ at Morgan Stanley.
On the downside, travel company TUI lost ground, with traders pointing to news that Boeing’s 737 MAX is set to remain grounded until mid-2020. The stock was also dented by a downgrade to ‘hold’ at Stifel.
Antofagasta was in the red even as the Chilean copper miner hailed record full-year copper production despite a dip in the fourth quarter due partly to unrest in Chile.
Luxury fashion brand Burberry was under the cosh as it posted a rise in third-quarter sales and lifted its revenue guidance for the year but said sales in Hong Kong were dented by unrest.
Russ Mould, investment director at AJ Bell, said: "It is hard to square the market reaction with today’s trading update.
"Revenue upgrades and a solid quarterly sales performance would typically see a company be rewarded rather than greeted with raspberries by the market.
"The strong run the shares have enjoyed in recent months may have prompted some profit taking and the reminder of how closely the company’s fortunes are tied to China may have provoked some nervousness given the deadly virus which is currently afflicting the country. The political disruption in Hong Kong is also having an impact too."
Sainsbury’s was on the back foot after the supermarket chain said retail and operations director Simon Roberts will become chief executive from 1 June, succeeding Mike Coupe.
Close Brothers tumbled after it said in a pre-close trading update that the loan book remained broadly flat in a "difficult UK economic environment".
FTSE 100 - Risers
Berkeley Group Holdings (The) (BKG) 5,458.00p 5.24%
Sage Group (SGE) 771.40p 5.10%
London Stock Exchange Group (LSE) 7,882.00p 2.26%
Taylor Wimpey (TW.) 218.80p 2.10%
Aveva Group (AVV) 5,125.00p 1.89%
Persimmon (PSN) 3,028.00p 1.71%
St James's Place (STJ) 1,137.50p 1.56%
Legal & General Group (LGEN) 312.10p 1.46%
Ashtead Group (AHT) 2,587.00p 1.37%
SSE (SSE) 1,501.50p 1.28%
FTSE 100 - Fallers
TUI AG Reg Shs (DI) (TUI) 842.40p -4.92%
Antofagasta (ANTO) 918.60p -3.31%
Burberry Group (BRBY) 2,202.00p -2.70%
Sainsbury (J) (SBRY) 207.60p -2.26%
NMC Health (NMC) 1,454.50p -2.19%
Johnson Matthey (JMAT) 2,775.00p -1.67%
Vodafone Group (VOD) 152.64p -1.46%
Imperial Brands (IMB) 1,957.20p -1.40%
Royal Bank of Scotland Group (RBS) 221.60p -1.38%
BT Group (BT.A) 176.16p -1.36%
FTSE 250 - Risers
IP Group (IPO) 70.20p 4.15%
IntegraFin Holding (IHP) 480.00p 3.78%
NewRiver REIT (NRR) 193.60p 3.20%
Diploma (DPLM) 1,984.00p 3.12%
Airtel Africa (AAF) 72.65p 2.61%
Hiscox Limited (DI) (HSX) 1,370.00p 2.24%
Trainline (TRN) 490.00p 2.19%
Elementis (ELM) 137.90p 2.15%
Syncona Limited NPV (SYNC) 224.50p 2.05%
PPHE Hotel Group Ltd (PPH) 2,020.00p 2.02%
FTSE 250 - Fallers
Close Brothers Group (CBG) 1,453.00p -7.28%
Tullow Oil (TLW) 50.28p -5.10%
Cairn Energy (CNE) 186.00p -3.07%
Quilter (QLT) 160.60p -2.96%
Kaz Minerals (KAZ) 524.80p -2.34%
Hunting (HTG) 341.20p -2.18%
Playtech (PTEC) 368.80p -2.05%
Petrofac Ltd. (PFC) 367.30p -2.00%
Spirent Communications (SPT) 228.50p -1.93%
Victrex plc (VCT) 2,422.00p -1.78%