London midday: FTSE turns higher amid sterling weakness; Melrose rallies

by | Sep 7, 2023

(Sharecast News) – London stocks had popped into the black by midday, helped along by a weaker pound, as investors continued to fret about the potential for further rate hikes from the Federal Reserve, and after the release of uninspiring Chinese trade and German industrial production figures.
The FTSE 100 was up 0.4% at 7,455.71, reversing earlier losses, with sterling down 0.4% against the dollar at 1.2460. The currency took a hit on Wednesday from dovish comments by Bank of England governor Andrew Bailey and solid US services data.

A weaker pound tends to boost the top-flight index, as around 70% of its constituents derive their earnings from overseas.

Russ Mould, investment director at AJ Bell, said: “Will they, won’t they? The guessing game regarding the next steps for central banks lifting interest rates is giving investors a headache.

“The US markets slipped yesterday following stronger than expected services sector data and a strengthening oil price which implies inflation will remain sticky, thus suggesting the Fed will keep lifting rates.

“Each day brings a new take on the matter – one minute people are saying that rates are near the peak of the cycle as wage growth slows and pockets of inflation ease, the next we have signs that the economy is staying strong and input cost pressures remain.

“It also doesn’t help there are divergent fortunes geographically. For example, comments by the Bank of England governor called into question the need for further rate hikes in the UK. That triggered a sell-off in the pound, putting it at a three-month low versus the dollar.

“All these moving parts would suggest that investors are struggling to know how to position their portfolios.”

Data released earlier by Halifax showed that annual house prices in the UK suffered their worst fall in August since 2009 amid rising mortgage costs.

House prices fell 4.6% on the year following a 2.5% decline in July. On the month, house prices were down 1.2% in August – the largest monthly fall since November 2022 – following a 0.4% dip a month earlier.

A typical home now costs £279,569, down by around £14,000 over the last year and back to the level seen in early 2022.

Halifax said Southern England and Wales are seeing the most downward pressure on property prices, while Scotland is showing greater resilience.

Kim Kinnaird, Director, Halifax Mortgages, said: “Market activity levels slowed during August, and while there is always a seasonality effect at this time of year, it also isn’t surprising given the pace of mortgage rate increases over June and July. While these did ease last month, rates remain much higher compared to recent years. This may well have prompted prospective buyers to defer transactions in the hope of some stability, and greater clarity on the future direction of rates in the coming months.

“The market will continue to rebalance until it finds an equilibrium where buyers are comfortable with mortgage costs in a higher range than seen over the previous 15 years. We do expect further downward pressure on property prices through to the end of this year and into next, in line with previous forecasts.”

In equity markets, Melrose Industries rallied after it lifted its annual outlook and said trading has been ahead of expectations, partly due to higher-than-expected margins at the engines division.

Shares in Direct Line surged as the insurer slapped drivers with a 25% premium hike to improve operating profit next year while it also picked up £520m via the sale of its commercial lines business.

On the downside, heavily-weighted miners fell, with Anglo, Rio Tinto and Antofagasta all lower.

Insurer Beazley was in the red as it said it remains on track to hit guidance after delivering record profits in the first half, though its combined ratio jumped.

London Stock Exchange Group was also down after investors Blackstone and Thomson Reuters raised around £2.75bn from the sales of its shares.

Paper and packaging company Smurfit Kappa lost ground as it confirmed it is in merger talks with US peer WestRock.

Pets at Home slumped after the Competition and Markets Authority said it was launching a probe into the veterinary services market for household pets.

Synthomer tanked as it announced a £276m rights issue, while Prudential, Admiral, DS Smith, Derwent London, Harbour Energy and TBC Bank all fell as they traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 7,455.71 0.40%
FTSE 250 (MCX) 18,452.11 0.00%
techMARK (TASX) 4,259.72 0.15%

FTSE 100 – Risers

Melrose Industries (MRO) 537.80p 5.66%
Rolls-Royce Holdings (RR.) 222.50p 3.63%
Ocado Group (OCDO) 872.00p 2.95%
Relx plc (REL) 2,690.00p 2.01%
M&G (MNG) 195.50p 1.96%
Mondi (MNDI) 1,320.00p 1.85%
Burberry Group (BRBY) 2,117.00p 1.53%
3i Group (III) 1,987.00p 1.53%
Centrica (CNA) 158.35p 1.47%
Convatec Group (CTEC) 234.40p 1.38%

FTSE 100 – Fallers

Beazley (BEZ) 517.50p -4.34%
Anglo American (AAL) 2,038.00p -2.30%
Prudential (PRU) 912.80p -2.19%
Rio Tinto (RIO) 4,892.00p -1.74%
Smith (DS) (SMDS) 299.40p -1.67%
JD Sports Fashion (JD.) 137.00p -1.65%
London Stock Exchange Group (LSEG) 8,156.00p -1.31%
Antofagasta (ANTO) 1,476.50p -1.30%
Endeavour Mining (EDV) 1,569.00p -1.20%
Airtel Africa (AAF) 114.40p -1.12%

FTSE 250 – Risers

Direct Line Insurance Group (DLG) 174.50p 16.26%
Darktrace (DARK) 372.40p 3.44%
Energean (ENOG) 1,153.00p 3.22%
Mitie Group (MTO) 103.80p 2.98%
easyJet (EZJ) 433.50p 2.97%
TUI AG Reg Shs (DI) (TUI) 471.20p 2.70%
FirstGroup (FGP) 154.70p 2.65% Group (MONY) 253.80p 2.34%
Dr. Martens (DOCS) 157.60p 1.94%
Carnival (CCL) 1,104.00p 1.89%

FTSE 250 – Fallers

Synthomer (SYNT) 42.64p -29.87%
Pets at Home Group (PETS) 345.00p -8.87%
Harbour Energy (HBR) 235.30p -7.40%
Safestore Holdings (SAFE) 817.00p -5.17%
Genus (GNS) 2,122.00p -5.01%
Watches of Switzerland Group (WOSG) 577.00p -3.75%
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 135.00p -3.30%
Warehouse Reit (WHR) 81.50p -3.09%
TBC Bank Group (TBCG) 2,700.00p -2.88%
CMC Markets (CMCX) 101.00p -2.70%

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