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London midday: Stocks extend gains despite disappointing PMIs

By Michele Maatouk

Date: Wednesday 23 Sep 2020

London midday: Stocks extend gains despite disappointing PMIs

(Sharecast News) - London stocks had extended gains by midday on Wednesday as investors brushed aside news that the UK's post-lockdown recovery was losing steam.
The FTSE 100 was up 2.2% at 5,959.37, recovering from the heavy losses seen on Monday.

Market participants largely shrugged off the latest survey from IHS/Markit CIPS, which showed the flash composite purchasing managers' index for the UK - which measures activity in the services and manufacturing sectors - fell to 55.7 this month from August's six-year high of 59.1. This was below consensus expectations of 56.1.

Meanwhile, the services PMI declined to 55.1 from 58.8, missing expectations of 55.9. The manufacturing PMI printed at 54.3 for September, down from 55.2 but a touch ahead of expectations for a reading of 54.0.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

The survey also showed that jobs continued to be cut at a fierce rate in September as firms looked to reduce costs amid weak demand.

Chris Williamson, chief business economist at IHS Markit, said: "The UK economy lost some of its bounce in September, as the initial rebound from Covid-19 lockdowns showed signs of fading. It was not surprising to see that the slowdown was especially acute in services, where the restaurant sector in particular saw demand fall sharply as the Eat Out to Help Out scheme was withdrawn."

Thomas Pugh, UK economist at Capital Economics said the drop in the composite flash PMI suggests the recovery has already started to flatten out.

"And reinstating restrictions on business opening hours and encouraging people to work from home again could cause the recovery to stall completely in Q4," he said.

"Indeed, it now seems likely that the UK restrictions will set back the economic recovery and cause GDP to stagnate in Q4. But the big risk is that the government has to go further. For example, a two-week national lockdown could reduce the level of GDP by 5% and set back the economic recovery by a year."

In equity markets, engine maker Rolls-Royce and GKN owner Melrose Industries were among the top gainers, having fallen heavily at the start of the week on concerns about the impact of Covid-19 and tighter restrictions.

Other stocks hit earlier in the week were also recovering, with British Airways parent IAG and budget airlines easyJet and Wizz Air trading higher.

Housebuilders were on the rise, while JD Sports Fashion rallied following well-received first-quarter results from Nike.

Diploma surged after raising around £190m in a placing to help fund the £357m acquisition of US-based wire and cable distributor Windy City Wire Cable and Technology Products, and following an upgrade to 'overweight' at JPMorgan. The bank said Diploma was buying a good business at a reasonable price.

Upper Crust and Caffe Ritazza owner SSP Group rallied despite warning of "considerable" job losses and saying it expects second-half sales to plummet by 86% amid the coronavirus pandemic.

3i Group advanced after saying results at its Action discount retail business beat expectations in the past three months as the private equity investor reported mixed trading at its other portfolio businesses.

On the downside, precious metals miners Fresnillo, Polymetal and Hochschild lost their shine as gold prices fell.

PZ Cussons retreated as it said it had a good start to the current financial year but that it expected tougher trading with the UK and other markets in recession.

Market Movers

FTSE 100 (UKX) 5,959.37 2.23%
FTSE 250 (MCX) 17,090.58 1.60%
techMARK (TASX) 3,786.53 1.89%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 171.05p 6.44%
Barratt Developments (BDEV) 455.00p 5.18%
M&G (MNG) 155.60p 4.68%
JD Sports Fashion (JD.) 797.80p 4.56%
Taylor Wimpey (TW.) 103.70p 4.56%
Standard Chartered (STAN) 358.40p 4.13%
Prudential (PRU) 1,116.50p 3.96%
Melrose Industries (MRO) 115.00p 3.93%
NATWEST GROUP PLC ORD 100P (NWG) 100.25p 3.93%
Whitbread (WTB) 2,125.00p 3.71%

FTSE 100 - Fallers

Fresnillo (FRES) 1,231.50p -3.64%
Polymetal International (POLY) 1,680.50p -1.12%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,730.00p 0.02%
SEGRO (SGRO) 950.80p 0.11%
Land Securities Group (LAND) 507.30p 0.28%
Antofagasta (ANTO) 1,060.00p 0.28%
Tesco (TSCO) 226.70p 0.35%
Ocado Group (OCDO) 2,864.00p 0.88%
BT Group (BT.A) 104.45p 0.97%
Sage Group (SGE) 727.80p 1.00%

FTSE 250 - Risers

Diploma (DPLM) 2,118.00p 23.79%
SSP Group (SSPG) 210.80p 16.66%
Cineworld Group (CINE) 49.28p 11.62%
Biffa (BIFF) 213.50p 7.07%
Greencore Group (GNC) 102.20p 6.51%
Hays (HAS) 111.90p 5.97%
William Hill (WMH) 225.70p 5.76%
Paragon Banking Group (PAG) 329.80p 5.71%
Aggreko (AGK) 373.80p 5.53%
easyJet (EZJ) 522.20p 5.52%

FTSE 250 - Fallers

Energean (ENOG) 576.10p -7.54%
Network International Holdings (NETW) 272.80p -7.53%
PZ Cussons (PZC) 207.00p -3.72%
Hochschild Mining (HOC) 219.40p -3.18%
TI Fluid Systems (TIFS) 132.10p -2.21%
Shaftesbury (SHB) 484.00p -1.87%
Beazley (BEZ) 329.00p -1.85%
GCP Student Living (DIGS) 131.60p -1.50%
Future (FUTR) 1,864.00p -1.38%
Centamin (DI) (CEY) 204.40p -1.30%

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