London stocks were still in the black by midday on Monday as investors digested the latest reading on the UK manufacturing sector, with BT sharply higher after confirming it had hit its cost savings target early.
The FTSE 100 was up 0.4% at 7,266.3.
Neil Wilson, chief market analyst at Markets.com, said: “Wall Street closed out Friday with its best month since November 2020 as all three major averages hit fresh all-time highs. Bets that central banks will raise rates to fight inflation may have caused a wipe-out in the shorter end of the bond market last week, but the gyrations are not affecting stock markets too much at the moment.
“Corporate earnings are strong with about 80% of US firms reporting delivering profits ahead of expectations. A slew of key central bank decisions this week has the potential to up-end the sense of calm but so far, we think policy moves are reasonably well telegraphed. Nevertheless, there are lots of questions facing the central bankers this week.”
On the macroeconomic front, a survey released earlier showed the slowdown in manufacturing growth eased a little in October, but the sector continued to be weighed down by supply chain issues.
The IHS Markit/CIPS manufacturing purchasing managers’ index ticked up to 57.8 from 57.1 in September, rising for the first time in five months and coming in a touch ahead of the initial estimate of 57.7 A reading above 50.0 signals expansion, while a reading below indicates contraction.
Still, the survey found that manufacturing output rose only marginally and at the slowest pace for eight months. Companies reported that supply chain delays alongside shortages of raw materials, staff and certain skills had contributed to slower output growth.
Rob Dobson, director at IHS Markit, said: “Strained global supply chains are disrupting production schedules, while staff shortages and declining intakes of new export work are also stymieing the upturn.
“This low growth environment is occurring in tandem with a severe upshot in inflationary pressures, with manufacturers reporting both a near-record increase in input costs and record rise in selling prices.”
In equity markets, BT surged after the telecoms group confirmed it has delivered on its £1bn of gross annualised cost savings 18 months ahead of its March 2023 target.
Land Securities rose after it agreed to buy property regeneration company U&I Group in a £190m deal, while IAG flew higher after it said British Airways has agreed a £1bn five-year credit facility.
On the downside, Barclays fell as it said chief executive Jes Staley was standing down with immediate effect after a probe by UK financial regulators into his links with convicted sex offender Jeffrey Epstein.
Richard Hunter, head of markets at Interactive Investor, said: “Staley will be contesting the findings of the probe and in the meantime his replacement has already been announced, suggesting that contingency measures had already been put in place.
“Even so, the inevitable disruption will be an unwelcome side show to Barclays’ recently strengthening recovery.”
Housebuilders were also under pressure amid the prospect of increased mortgage costs, with Barratt Developments, Taylor Wimpey, Persimmon, Berkeley, Vistry and Bellway all lower.
IG market analyst Joshua Mahony said: “Thursday’s Bank of England rate decision represents one of the most important events of the week for traders, with markets signalling a 57% chance that we will see the first rate rise since 2018.
“However, it is the longer-term outlook which holds particular interest for the housebuilders, with traders seeing a 59% chance that rates will top 1% by June 2022. While the removal of all stamp duty holiday benefits has thrown caution to the wind for investors, the prospect of a significant jump in interest rates is going to do little to help bolster support for the housebuilding stocks.”
Cybersecurity firm Darktrace was under the cosh again ahead of the end of a freeze on insiders selling shares.
Market Movers
FTSE 100 (UKX) 7,266.37 0.40%
FTSE 250 (MCX) 23,191.03 0.37%
techMARK (TASX) 4,580.26 0.64%
FTSE 100 – Risers
BT Group (BT.A) 144.95p 4.36%
Standard Chartered (STAN) 506.00p 2.24%
Next (NXT) 8,134.00p 2.11%
Smiths Group (SMIN) 1,380.00p 1.81%
NATWEST GROUP PLC ORD 100P (NWG) 224.90p 1.72%
Lloyds Banking Group (LLOY) 51.07p 1.69%
International Consolidated Airlines Group SA (CDI) (IAG) 166.34p 1.55%
SSE (SSE) 1,667.50p 1.46%
GlaxoSmithKline (GSK) 1,529.40p 1.38%
Royal Mail (RMG) 426.20p 1.36%
FTSE 100 – Fallers
Darktrace (DARK) 712.00p -11.28%
Barratt Developments (BDEV) 637.80p -3.80%
Berkeley Group Holdings (The) (BKG) 4,217.00p -3.17%
Persimmon (PSN) 2,640.00p -2.98%
Taylor Wimpey (TW.) 150.10p -2.88%
Sainsbury (J) (SBRY) 291.00p -2.81%
Ocado Group (OCDO) 1,754.50p -2.69%
Barclays (BARC) 199.16p -1.53%
ITV (ITV) 106.25p -1.30%
Aveva Group (AVV) 3,515.00p -1.21%
FTSE 250 – Risers
Liontrust Asset Management (LIO) 2,270.00p 4.13%
XP Power Ltd. (DI) (XPP) 5,440.00p 4.02%
Auction Technology Group (ATG) 1,470.00p 3.96%
Bytes Technology Group (BYIT) 552.00p 3.37%
Micro Focus International (MCRO) 368.60p 3.34%
Baillie Gifford Shin Nippon (BGS) 243.00p 3.18%
National Express Group (NEX) 235.40p 2.97%
Baillie Gifford Japan Trust (BGFD) 1,028.00p 2.59%
Rank Group (RNK) 168.00p 2.44%
Indivior (INDV) 249.00p 2.38%
FTSE 250 – Fallers
Petropavlovsk (POG) 22.88p -4.03%
Baltic Classifieds Group (BCG) 211.00p -2.76%
Plus500 Ltd (DI) (PLUS) 1,281.50p -2.66%
Vistry Group (VTY) 1,188.50p -2.58%
Bellway (BWY) 3,239.00p -2.23%
Countryside Properties (CSP) 460.20p -2.17%
Redrow (RDW) 633.00p -1.89%
Crest Nicholson Holdings (CRST) 349.60p -1.80%
CMC Markets (CMCX) 248.00p -1.78%
Network International Holdings (NETW) 318.20p -1.55%
