London close: Simmering geopolitics still weighing on FTSE

Tue 05 Sep 2017

LONDON (SHARECAST) - (ShareCast News) - London stocks closed lower on Tuesday, but losses were restrained as investors largely shrugged off a disappointing reading on the UK services sector and despite continuing tensions on the Korean peninsula.
The FTSE 100 was down 0.52% to 7,372.92, back in the red after a pop higher earlier as the pound slipped after the services data. However, the currency soon recovered and by the London close was trading up 0.52% against the euro at 1.0927 and 0.63% higher versus the greenback at 1.3014.

European markets were all down on the day, with Germany being the exception, as the DAX closed 0.18% higher to 12,123.71. The CAC 40 was down 0.34% to 5,086.56 and the the IBEX 35 was also lower at 10,179.80. Negative services PMI figures may have played their part here with Germany having the only tick higher.

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.

In the latest developments on the Korean peninsula, according to the South China Morning Post, which cited Chinese diplomatic analysts, the Asian giant was likely to support further sanctions against the Hermit Kingdom, including slashing its oil exports to the North Asian nation, but not fully, so as to avoid the collapse of its ally.

Acting as a backdrop, overnight Seoul had reportedly broached with Washington the possibility of deploying a US aircraft carrier and strategic bombers to the region. The American president had reportedly also granted the South access to more powerful warheads that could be deployed on its own missiles.

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 25.73% 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 just over 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 down 0.81% despite reporting 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 climbed slightly. It reported good progress in the first half and 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) 7,372.92 -0.52%
FTSE 250 (MCX) 19,726.83 0.15%
techMARK (TASX) 3,428.59 0.60%

FTSE 100 - Risers

Merlin Entertainments (MERL) 467.00p 2.10%
Paddy Power Betfair (PPB) 7,110.00p 2.01%
Severn Trent (SVT) 2,275.00p 1.11%
Marks & Spencer Group (MKS) 324.20p 1.06%
Barratt Developments (BDEV) 624.00p 1.05%
Next (NXT) 4,267.00p 0.95%
Whitbread (WTB) 3,773.00p 0.94%
BAE Systems (BA.) 610.50p 0.91%
Sainsbury (J) (SBRY) 235.80p 0.73%
United Utilities Group (UU.) 912.50p 0.66%

FTSE 100 - Fallers

Provident Financial (PFG) 800.00p -6.54%
Carnival (CCL) 5,165.00p -3.55%
Reckitt Benckiser Group (RB.) 7,092.00p -2.72%
Fresnillo (FRES) 1,628.00p -2.16%
easyJet (EZJ) 1,156.00p -2.12%
Micro Focus International (MCRO) 2,207.00p -1.69%
CRH (CRH) 2,699.00p -1.64%
Smurfit Kappa Group (SKG) 2,331.00p -1.60%
SEGRO (SGRO) 532.00p -1.57%
Admiral Group (ADM) 1,890.00p -1.51%

FTSE 250 - Risers

Aveva Group (AVV) 2,414.00p 25.73%
Evraz (EVR) 330.00p 6.04%
Redrow (RDW) 647.00p 4.35%
Euromoney Institutional Investor (ERM) 1,123.00p 3.98%
Tullow Oil (TLW) 160.60p 3.95%
Victrex plc (VCT) 2,300.00p 3.60%
Hunting (HTG) 416.20p 3.30%
Wood Group (John) (WG.) 609.50p 3.22%
Sophos Group (SOPH) 534.00p 3.19%
Bovis Homes Group (BVS) 1,071.00p 3.18%

FTSE 250 - Fallers

Acacia Mining (ACA) 188.80p -6.63%
Inmarsat (ISAT) 687.50p -6.53%
SSP Group (SSPG) 534.00p -3.96%
Hochschild Mining (HOC) 281.90p -3.36%
Beazley (BEZ) 487.70p -3.33%
Restaurant Group (RTN) 315.00p -2.57%
McCarthy & Stone (MCS) 160.40p -2.49%
Lancashire Holdings Limited (LRE) 665.00p -2.28%
Metro Bank (MTRO) 3,366.00p -2.12%
Dixons Carphone (DC.) 166.60p -1.88%
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