London midday: Stocks dip as investors digest services data; retailers gain

Tue 05 Sep 2017

LONDON (SHARECAST) - (ShareCast News) - London stocks had reversed earlier gains to trade lower by midday on Tuesday, but losses were minimal as investors largely shrugged off a disappointing reading on the UK services sector.
The FTSE 100 was down 0.1% to 7,405.9, back in the red after a pop higher earlier as the pound slipped after the services data. However, the currency soon recovered and by midday was trading up 0.2% against the euro at 1.0890 and 0.2% versus the greenback at 1.2959.

The UK's services sector activity slumped to an 11-month low last month, with the IHS Markit UK services purchasing managers' index falling to 53.2 in August from 53.8 the month before, a little short of the 53.5 that the market expected.

Services companies said subdued client demand and heightened uncertainty about the domestic economic outlook was weighing on growth.

New order volumes increased at the second slowest rate since last September, with a number of service providers commented that fragile business confidence had led to delayed spending decisions among clients.

Weaker growth was most evident in consumer-facing sectors such as hotels, restaurants and other personal services, Markit said.

Chris Williamson, chief business economist at IHS Markit, said: "While robust manufacturing performance suggests the economy may be rebalancing towards goods production, aided by the weaker currency, the slowdowns in services and construction send warning signals about the health of the domestic economy."

There were a couple of bright spots on the data front, however. The latest figures from the British Retail Consortium revealed that like-for-like sales rose 1.3% last month compared to a 0.9% drop in August 2016.

On a total basis, sales were up 2.4% in August versus a 0.3% decline in the same month last year. This marked the strongest growth recorded by the BRC since Easter, above the three- and 12-month averages of 1.9% and 1.6%, respectively.

Retail shares got a boost, with Marks & Spencer and Next both higher.

Meanwhile, data released before the session kicked off showed China's services sector expanded at a faster pace last month. The Caixin China services purchasing managers' index rose to 52.7 from 51.5 in July, marking the highest reading in the last three months. Mining stocks were boosted by the news earlier in the session, but by midday most of the gains in the sector had evaporated.

Elsewhere, M&A news helped to provide some cheer, with Aveva up a whopping 27% after it agreed a merger with the software arm of France's Schneider Electric where the UK company's existing shareholders will own 40% of the business.

FTSE 250 housebuilder Redrow rallied after it reported a 26% jump in full-year pre-tax profit as it hiked its dividend by 70% and upgraded its guidance. FTSE 100 peer Barratt Developments followed suit, trading up 1%.

Oilfield services group Petrofac gushed higher after announcing the award of a €340m contract with a subsidiary of Russia's Gazprom, while DS Smith was flat as it reported an "encouraging" start to the financial year, with trading in line with expectations.

In broker action, Merlin Entertainments was given a leg up by a positive note from Morgan Stanley, while Hunting was lifted by an upgrade to 'buy' at Canaccord Genuity.

Insurer Admiral was under the cosh after Berenberg downgraded the stock to 'sell'.

Infrastructure and support services company Stobart Group retreated. Although it reported good progress in the first half, it said delays in the commissioning of certain third party biomass stations in the energy business impacted short-term volumes and said it was taking longer than originally planned to introduce additional airlines to operate from London Southend Airport.

Market Movers

FTSE 100 (UKX) 7,405.91 -0.08%
FTSE 250 (MCX) 19,757.87 0.30%
techMARK (TASX) 3,440.90 0.96%

FTSE 100 - Risers

Merlin Entertainments (MERL) 465.40p 1.75%
Whitbread (WTB) 3,794.00p 1.50%
Paddy Power Betfair (PPB) 7,070.00p 1.43%
Marks & Spencer Group (MKS) 325.40p 1.43%
Shire Plc (SHP) 3,953.00p 1.38%
Severn Trent (SVT) 2,274.00p 1.07%
Rentokil Initial (RTO) 304.70p 0.99%
Barratt Developments (BDEV) 623.50p 0.97%
Next (NXT) 4,268.00p 0.97%
Sage Group (SGE) 697.00p 0.94%

FTSE 100 - Fallers

Provident Financial (PFG) 811.00p -5.26%
Reckitt Benckiser Group (RB.) 7,069.00p -3.03%
Fresnillo (FRES) 1,640.00p -1.44%
Standard Life Aberdeen (SLA) 424.40p -1.14%
Ashtead Group (AHT) 1,686.00p -1.00%
Pearson (PSON) 597.50p -0.99%
Rolls-Royce Holdings (RR.) 904.00p -0.82%
CRH (CRH) 2,724.00p -0.73%
Prudential (PRU) 1,776.00p -0.70%
Legal & General Group (LGEN) 256.20p -0.70%

FTSE 250 - Risers

Aveva Group (AVV) 2,458.00p 28.02%
Hunting (HTG) 417.20p 3.55%
Redrow (RDW) 641.50p 3.47%
Wood Group (John) (WG.) 610.50p 3.39%
Halfords Group (HFD) 325.80p 3.30%
Amec Foster Wheeler (AMFW) 456.20p 3.21%
Evraz (EVR) 320.60p 3.02%
Victrex plc (VCT) 2,284.00p 2.88%
Sophos Group (SOPH) 530.50p 2.51%
Bovis Homes Group (BVS) 1,064.00p 2.50%

FTSE 250 - Fallers

Acacia Mining (ACA) 187.90p -7.07%
Inmarsat (ISAT) 701.00p -4.69%
Hochschild Mining (HOC) 285.20p -2.23%
Fisher (James) & Sons (FSJ) 1,500.00p -2.02%
Carillion (CLLN) 47.48p -2.00%
Millennium & Copthorne Hotels (MLC) 460.00p -1.90%
SSP Group (SSPG) 546.00p -1.80%
Softcat (SCT) 387.20p -1.78%
Lancashire Holdings Limited (LRE) 668.50p -1.76%
Aldermore Group (ALD) 214.70p -1.60%
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