London midday: Stocks turn higher as banks rally, GDP beats expectations
London stocks had edged higher by midday on Monday after a flat start, as banking stocks rallied and the mood was boosted by the release of better-than-expected economic growth figures.
The FTSE 100 was up 0.3% to 7,297.51, while the pound was up 0.1% against the dollar at 1.2934 and 0.1% lower versus the euro at 1.1173.
Stocks had kicked the session off flat following a mostly downbeat session in Asia, after data revealed that China's surplus with the US hit a record high of $31bn in August, adding to worries about escalating trade tensions between the US and China.
Despite the more positive tone, trade was likely to remain on investors' minds amid the possibility that US President Trump could slap tariffs on a further $200bn worth of Chinese goods and following his threat to levy tariffs on another $267bn of Chinese products.
"The $200bn we are talking about could take place very soon depending on what happens with them," Trump said in comments made on Air Force One, as he travelled from Montana to South Dakota. "To a certain extent it's going to be up to China. And I hate to say this, but behind that is another $267bn ready to go on short notice if I want. That changes the equation."
But good news on the economic front helped to lift the mood as data from the Office for National Statistics showed the UK economy grew more than expected in the three months July, with the hot weather and the World Cup providing a boost.
UK gross domestic product grew by 0.6%, up from 0.4% in the previous three-month period and beating expectations for a 0.5% rise. On the month, GDP grew 0.3%, up from 0.1% in June and beating expectations for a 0.2% increase.
The services sector grew by 0.3% after being flat in June, while the construction sector expanded by 0.5% and manufacturing contracted by 0.2%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Overall, July’s data suggest that the risks to the MPC’s forecast for another 0.4% quarter-on-quarter rise in GDP growth in Q3 lie to the upside. But the fall in the confidence components of the Markit/CIPS and Lloyds surveys, the slowdown in global manufacturing, and the prospect of a further escalation of political tensions in the UK suggest that the economy is heading for a weak end to 2018.
Meanwhile, industrial and manufacturing production edged lower in three months to July, according to the ONS, both missing expectations.
Manufacturing production dropped 0.2% on the month compared to a 0.4% increase the month before and expectations for a 0.2% increase. Industrial output was 0.1% lower on the month versus a 0.4% gain in June and expectations of a 0.2% rise.
Banks helped to underpin gains, with RBS, Barclays and Lloyds all in the green, tracking a solid performance from their European counterparts. Banks in Italy were particularly strong as the country's finance minister said yields would drop when the government lays out its budget for 2019.
Elsewhere, RPC Group surged as it confirmed that it was in "preliminary discussions" with two private equity groups over a potential offer for the plastics manufacturer. The FTSE 250 group, which has come under pressure from investors over its growth plans, said talks were taking place with both Apollo Global Management and Bain Capital.
Primark owner Associated British Foods was under pressure after it reiterated its outlook for the year as a strong performance from its retail arm and grocery, agriculture and ingredients business should more than offset the impact of lower EU sugar prices, but warned it would take a £20m hit from the stronger pound.
888 Holdings was in the red as it launched its online sports betting brand in New Jersey, while department store group Debenhams was sharply lower following reports that it has appointed advisers from KPMG to explore restructuring plans, including handing back excess store space to landlords or a company voluntary arrangement.
Sports Direct, which holds a near 30% stake in Debenhams, was little moved.
GlaxoSmithKline slipped as it said the US Food and Drug Administration said it needs more clinical data to support the approval of mepolizumab as an add-on treatment for exacerbations in patients with chronic obstructive pulmonary disease.
In broker note action, Morrisons was the biggest gainer after an upgrade to ‘buy’ at HSBC, while Rio Tinto was lifted to ‘overweight’ at JPMorgan but Glencore was cut to ‘neutral’ at JPM.
Bakkavor was upgraded to ‘buy’ at HSBC, Lonmin was boosted to ‘hold’ at Liberum and Standard Chartered was upgraded to ‘buy’ by Investec.
Market Movers
FTSE 100 (UKX) 7,297.51 0.27%
FTSE 250 (MCX) 20,238.15 0.14%
techMARK (TASX) 3,450.82 0.24%
FTSE 100 - Risers
Morrison (Wm) Supermarkets (MRW) 267.90p 2.29%
Royal Bank of Scotland Group (RBS) 250.60p 2.29%
Barclays (BARC) 176.98p 1.42%
WPP (WPP) 1,181.50p 1.42%
Centrica (CNA) 150.05p 1.32%
Standard Life Aberdeen (SLA) 317.70p 1.28%
Barratt Developments (BDEV) 560.20p 1.23%
Micro Focus International (MCRO) 1,301.50p 1.17%
Lloyds Banking Group (LLOY) 59.42p 1.16%
Just Eat (JE.) 711.00p 0.99%
FTSE 100 - Fallers
Melrose Industries (MRO) 219.00p -3.18%
Fresnillo (FRES) 822.50p -1.38%
Glencore (GLEN) 292.05p -1.32%
Antofagasta (ANTO) 734.40p -1.32%
Burberry Group (BRBY) 2,072.00p -0.96%
Associated British Foods (ABF) 2,249.00p -0.93%
Next (NXT) 5,408.00p -0.73%
BAE Systems (BA.) 615.60p -0.71%
Smurfit Kappa Group (SKG) 3,168.00p -0.69%
Johnson Matthey (JMAT) 3,456.00p -0.63%
FTSE 250 - Risers
RPC Group (RPC) 815.60p 19.31%
FirstGroup (FGP) 98.35p 3.74%
Moneysupermarket.com Group (MONY) 281.90p 2.36%
Ultra Electronics Holdings (ULE) 1,621.00p 2.27%
TP ICAP (TCAP) 287.00p 2.24%
QinetiQ Group (QQ.) 282.40p 2.13%
Bakkavor Group (BAKK) 174.20p 2.11%
Indivior (INDV) 265.00p 2.04%
Greencore Group (GNC) 179.05p 1.85%
William Hill (WMH) 255.20p 1.63%
FTSE 250 - Fallers
Sirius Minerals (SXX) 24.30p -7.67%
Just Group (JUST) 79.80p -5.56%
Ferrexpo (FXPO) 142.00p -3.86%
Centamin (DI) (CEY) 87.70p -2.97%
Ascential (ASCL) 422.20p -2.85%
Edinburgh Dragon Trust (EFM) 355.01p -2.47%
Equiniti Group (EQN) 245.50p -2.39%
Hochschild Mining (HOC) 158.08p -2.33%
Renewi (RWI) 60.80p -2.09%
Rank Group (RNK) 171.00p -2.06%