London stocks had gained ground by midday on Wednesday as investors digested the latest reading on the UK services and manufacturing sectors.
The FTSE 100 was up 0.4% at 7,115.63, after a survey showed the economic recovery continued in June, prompting a record hike in employment, but inflationary pressures gathered pace.
The IHS Markit flash UK composite output index was 61.7 in June. That was down on May’s final reading of 62.9, and was marginally below consensus for 61.5. But it remains among the fastest rates of expansion seen since the series began in January 1998.
The services business activity index was 61.7, compared to 62.9 in May, while the manufacturing PMI printed at 64.2 against May’s 65.6. The manufacturing output index was 62.0, one point lower than May’s 63.0 reading.
IHS Markit said companies had responded to rising workloads by hiring extra staff “at an unprecedent rate”. The composite employment index hit a record high of 58.5 in June, up on May’s 57.4. But it also noted input costs and output prices had reached fresh highs, as supply-chain disruptions weighed heavily.
IG market analyst Joshua Mahony said the decline in services growth is worrying, with exports falling for the second-consecutive month.
“One common theme appears the be the impact of rising prices, with input costs rising at the fastest pace in 13 years. While there are many differences between the West and China, it is clear that Chinese efforts to hinder the rise in commodity prices could also benefit businesses closer to home,” he said.
“While we saw both manufacturing and services PMI readings weaken in the UK, there are many aspects to be encouraged by, with employment continuing to remain buoyant, and the 12-month outlook remaining optimistic.”
In equity markets, Royal Dutch Shell was the standout gainer as Societe Generale upgraded the shares to ‘buy’.
In other broker note action, luxury brand Burberry was knocked lower by a downgrade to ‘hold’ at HSBC. Virgin Money and Travis Perkins were higher after upgrades at Investec and Deutsche Bank, respectively.
Tullow Oil and Cairn Energy gushed higher after upgrades at Canaccord Genuity.
Elsewhere, housebuilder Berkeley fell even as it reported a rise in annual profits driven by sales of new homes in London and the South East, while Phoenix Group lost ground after Swiss Re sold a 6.6% stake in the company.
Market Movers
FTSE 100 (UKX) 7,115.63 0.36%
FTSE 250 (MCX) 22,696.09 0.07%
techMARK (TASX) 4,485.21 0.29%
FTSE 100 – Risers
Royal Dutch Shell ‘B’ (RDSB) 1,427.60p 1.96%
Royal Dutch Shell ‘A’ (RDSA) 1,479.80p 1.87%
British Land Company (BLND) 525.00p 1.59%
Vodafone Group (VOD) 131.98p 1.34%
BT Group (BT.A) 205.30p 1.33%
Rolls-Royce Holdings (RR.) 109.60p 1.29%
BP (BP.) 326.60p 1.21%
Royal Mail (RMG) 589.20p 1.20%
Kingfisher (KGF) 361.60p 1.15%
Lloyds Banking Group (LLOY) 47.26p 1.06%
FTSE 100 – Fallers
Phoenix Group Holdings (PHNX) 671.40p -3.20%
Melrose Industries (MRO) 158.30p -2.52%
Fresnillo (FRES) 808.60p -2.30%
Informa (INF) 521.60p -1.40%
Barratt Developments (BDEV) 699.40p -1.38%
Evraz (EVR) 617.40p -1.34%
Berkeley Group Holdings (The) (BKG) 4,578.00p -1.34%
InterContinental Hotels Group (IHG) 5,006.00p -1.22%
Taylor Wimpey (TW.) 162.30p -1.22%
Flutter Entertainment (CDI) (FLTR) 13,805.00p -1.07%
FTSE 250 – Risers
NCC Group (NCC) 293.50p 4.08%
Tullow Oil (TLW) 64.00p 3.90%
Capita (CPI) 41.15p 3.34%
Trainline (TRN) 295.00p 2.50%
Wizz Air Holdings (WIZZ) 5,128.00p 2.23%
Mitchells & Butlers (MAB) 301.40p 2.17%
Micro Focus International (MCRO) 512.00p 2.15%
Premier Foods (PFD) 106.80p 2.10%
Mitie Group (MTO) 69.80p 2.05%
Liontrust Asset Management (LIO) 1,662.00p 1.96%
FTSE 250 – Fallers
Beazley (BEZ) 330.60p -3.02%
TI Fluid Systems (TIFS) 310.50p -2.36%
RHI Magnesita N.V. (DI) (RHIM) 4,150.00p -2.31%
Shaftesbury (SHB) 600.50p -2.28%
Howden Joinery Group (HWDN) 814.40p -2.12%
Moonpig Group (MOON) 431.40p -2.04%
Sirius Real Estate Ltd. (SRE) 111.00p -1.94%
Lancashire Holdings Limited (LRE) 638.50p -1.92%
Meggitt (MGGT) 480.00p -1.64%
888 Holdings (888) 392.40p -1.60%
