London midday: Stocks turn up as defensives and resources rally
By Michele Maatouk
Date: Monday 05 Nov 2018
(Sharecast News) - London stocks had turned higher by midday on Monday, with a mix of resources and defensive stocks erasing earlier losses as investors shrugged off a disappointing reading on the UK services sector.
The FTSE 100 was up 0.3% to 7,080.30, while the pound was 0.3% firmer against the dollar at 1.3012 and 0.5% stronger versus the euro at 1.1443 amid Brexit hopes and as both sides contended with their own issues.
The dollar was weaker ahead of Tuesday's mid-term elections - which could see things get complicated for the Trump administration if the Democrats win majority control of the House - and the latest rate announcement by the Federal Reserve on Thursday, while the euro was held back by worries about Italy's budget plans.
Meanwhile, The Sunday Times reported that Prime Minister Theresa May has agreed a customs deal with the European Union. According to the paper, May has secured concessions from the EU to keep the whole of the UK in a customs union after Brexit in a deal that would avoid the need for an Irish backstop.
The report was quickly dismissed as "speculation" by Downing Street, but this did little to dent sterling's gains.
To ramp up the pressure further, ITV's political editor said the government has decided that the default option of a no-deal Brexit will become the "probable outcome" unless there is a deal struck with the EU within a week.
Data out earlier revealed that activity in the UK's services sector slowed more than expected last month.
The IHS Markit-CIPS UK services purchasing managers' index fell to 52.2 in October from 53.9 the month before, short of the 53.3 that the market expected. Although still above the 50 mark that separates contraction from expansion, this was the weakest reading since snow-affected March and the second weakest since July 2016 as new orders softened for the third time in the past four months.
Following a disappointing manufacturing PMI survey but a better construction report last week, the combined PMI of 52.2 is well below its average reading of 53.9 in the third quarter and points to UK gross domestic product growth of just 0.2% if current levels are maintained, which would be less than half the 0.5% pace pencilled in for the third quarter. Third-quarter GDP is due to be published by the Office for National Statistics on Friday.
"Brexit uncertainty in particular continued to cloud the outlook, dampening current spending and investment, though other factors were also reported to have weakened demand, including global economic slowdown worries," said Chris Williamson, IHS Markit's chief business economist.
On the corporate front, Micro Focus rallied as it appointed Brian McArthur-Muscroft from Paysafe as a replacement finance chief after ITV, which was a touch weaker, lured Chris Kennedy from the software group.
Micro Focus also issued a short trading statement to the effect that full year revenue will be towards the upper end of its previously guided range and pledged to restart its share buyback programme.
The Footsie's heavyweight group of resources stocks, led by oil behemoths BP and Shell and miners including Rio Tinto, Glencore and Anglo American were lifted out of an early slump as the session progressed.
Plastic packaging supplier RPC Group gained as the deadline for private equity firms Apollo Global Management and Bain Capital to make an offer for the company was extended again.
On the downside, equipment rental firm Ashtead dropped after Barclays slashed its price target on the stock to 2,200p from 2,580p, while Babcock was hit by a downgrade to 'sector perform' at RBC Capital Markets.
Specialist insurer Hiscox slumped after saying that gross written premiums rose 14.3% to $3.04bn in the first nine months of the year, but that there had been more claims in the third quarter from US Hurricanes Florence and Michael and Typhoons Jebi and Trammi, which hit Japan.
Mediclinic was lower after it was cut to 'hold' at Investec.
Market Movers
FTSE 100 (UKX) 7,111.87 0.25%
FTSE 250 (MCX) 19,229.34 -0.50%
techMARK (TASX) 3,338.53 0.35%
FTSE 100 - Risers
Evraz (EVR) 575.00p 4.96%
Micro Focus International (MCRO) 1,287.00p 4.51%
AstraZeneca (AZN) 5,872.00p 2.44%
Rightmove (RMV) 467.85p 1.68%
Centrica (CNA) 147.50p 1.65%
Rio Tinto (RIO) 3,910.50p 1.49%
British American Tobacco (BATS) 3,392.00p 1.48%
Smith & Nephew (SN.) 1,377.00p 1.32%
Severn Trent (SVT) 1,912.00p 1.30%
Diageo (DGE) 2,667.50p 1.27%
FTSE 100 - Fallers
Kingfisher (KGF) 252.70p -3.92%
Ashtead Group (AHT) 1,904.50p -3.03%
Royal Mail (RMG) 359.24p -2.30%
Just Eat (JE.) 647.60p -2.26%
Melrose Industries (MRO) 175.10p -2.18%
Burberry Group (BRBY) 1,824.50p -2.17%
Smurfit Kappa Group (SKG) 2,514.00p -2.10%
Smith (DS) (SMDS) 381.90p -2.05%
Coca-Cola HBC AG (CDI) (CCH) 2,323.00p -1.90%
GVC Holdings (GVC) 933.00p -1.84%
FTSE 250 - Risers
Auto Trader Group (AUTO) 432.70p 3.67%
Sirius Minerals (SXX) 24.39p 2.55%
Ferrexpo (FXPO) 231.85p 2.50%
Entertainment One Limited (ETO) 428.80p 2.49%
Indivior (INDV) 207.10p 2.37%
RPC Group (RPC) 798.00p 1.99%
Aveva Group (AVV) 2,704.00p 1.88%
Go-Ahead Group (GOG) 1,604.00p 1.84%
Energean Oil & Gas (ENOG) 651.00p 1.72%
Hikma Pharmaceuticals (HIK) 1,903.00p 1.66%
FTSE 250 - Fallers
Hiscox Limited (DI) (HSX) 1,540.00p -6.44%
Thomas Cook Group (TCG) 51.45p -5.60%
Babcock International Group (BAB) 585.40p -5.40%
RHI Magnesita N.V. (DI) (RHIM) 3,870.00p -4.44%
Inchcape (INCH) 559.00p -4.20%
Metro Bank (MTRO) 2,280.00p -3.96%
BCA Marketplace (BCA) 206.00p -3.74%
Rank Group (RNK) 155.60p -3.59%
Just Group (JUST) 92.15p -3.41%
CYBG (CYBG) 267.00p -2.91%
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